The Times - UK (2022-02-21)

36 2GM Monday February 21 2022 | the times

Business

make £70 million this year. That is more

than double the highest annual profit

that it has previously posted, the

£34 million it made in the first Covid-19

year of 2020, in which it received nearly

£30 million of taxpayer support.

They have all started, or indicated

they will restart, dividend payments to

shareholders. Yet none of the big motor

retailers has paid back or indicated any

intention to hand back the furlough

grants and business rates relief they re-

ceived in 2020, which across the trade

will tally up to the high hundreds of mil-

lions of pounds.

Out of the public eye of the listed

markets, it is believed that the family-

owned Arnold Clark is the single larg-

est recipient of furlough support. It de-

clined to respond to requests for infor-

mation or comment. Its accounts for

2020 show that it received £75 million

in Covid-19 taxpayer support, a year in

which it reported profits of £156 million

and disclosed that its highest-paid di-

rector, likely to be its chief executive

Eddie Hawthorne, earned £3 million.

Another of the largest privately-

owned dealer groups is Sytner. It re-

ceived £45 million in 2020, a year in

which it posted profits of £100

million, reduced its workforce

by 1,000 and paid a £50 mil-

lion dividend to its parent

company, the US group

Penske Automotive.

Sytner did not respond

to requests for comment.

Like the rest of the

trade, Constellation Auto-

motive, the group that in-

cludes Cinch, webuyany-

car.com and British Car Auc-

tions and is owned by the

private equity firm TDR, is

likely to have had a record 2021.

It too declined to explain why it

has not returned any of the

£35 million it received in tax-

payer support.

The record 2021 the trade

has enjoyed is the result of a

curious cocktail of factors and

the unexpected benefits of the

Covid-19 pandemic.

The motor manufacturers

have complained loudly about

supply chain dislocation and

shortages of computer chips

for cars. They collectively

purchase (PCP) plans in which, after 36

monthly payments, if they choose to re-

tain their car they will need to make a

hefty “bullet” payment at the end of the

term. Most don’t, or can’t afford to, and

simply roll into another three-year PCP

plan with a new car.

The current environment of new car

shortages has led to a lack of supply and

unfulfilled demand in the second-hand

market. Auto Trader, the online used

car marketplace, reports that second-

reined back production volumes and

concentrated on producing only

higher-margin models, including elec-

trified cars. That has led to shortages in

the supply of new cars along with pent-

up demand, leading in turn to galloping

new car inflation, estimated to be run-

ning at 15 per cent.

The car market is structured in such

a way that many motorists are tied to

having to change their car every three

years as they are in personal contract

in the tax return because he no longer

considered himself resident in the UK.

In his tax return, the entrepreneur

had said that he would spend “no more

than two months per annum” in the

UK. However, court documents show

that he continued to work three days a

week at Matalan’s head office in

Liverpool and stayed at the same house

in the UK that he had lived in before.

During the 2000-01 tax year he was in

the UK for at least part of 152 days.

HMRC began to look at Hargreaves’s

tax affairs in 2004 but missed the dead-

line to open an investigation before

December 31, 2003. After “a period of

discussion” with his advisers, HMRC

decided in January 2007 that Har-

greaves owed £80 million of capital

gains tax and £4 million of income tax.

Hargreaves argued that the tax bill

was invalid because HMRC had

opened its investigation too late. He

won a case on these grounds in 2019 but

later agreed that the court had “dealt

with the ‘staleness point’ wrongly”.

His latest appeal was based on his be-

lief that officials had no basis on which

to begin a “discovery assessment”.

The Upper Tribunal, the highest

court that oversees tax cases, ruled

against Hargreaves earlier this month.

Hargreaves paid £35 million to

HMRC in 2018 and has sued PwC, the

big four accountancy firm that advised

him on his relocation to Monaco.

A spokesman for Hargreaves said

that he is “actively considering

appealing” against the latest judgment.

An HMRC spokesman said it wel-

comed “this long-awaited ruling which

supports our use of discovery assess-

ments in these high-value cases”.

Profits had slumped by 75 per cent and

the country was still in a state of semi-

lockdown. But Balfour Beatty reported

it was coming out of the pandemic in as

good a shape as could be expected. It

admitted that it could not have got

through it without the £19 million of

Covid job retention scheme grants, or

furlough money, that it had received

from the taxpayer via the Treasury. It

repaid the cash in full.

That was a year ago. The cynic might

suggest Balfour Beatty made the repay-

ment so that it could, guilt-free, begin

paying shareholder dividends and ex-

ecutive bonuses again.

Balfour Beatty did what it did and it

wasn’t alone. Whole swathes of the

retail sector did the same, though nota-

bly not Mike Ashley’s Frasers Group

nor JD Sports, whose chief executive

Peter Cowgill reasoned that fur-

lough money had “done what it

was intended to do” by saving

jobs and “prevented a large

taxpayer burden from un-

employment”.

Early next month the listed

motor retail sector will begin

reporting its 2021 financial per-

formance. Bumper profits will be

posted, likely to be £1 billion across

the scores of operators in this

fragmented sector.

Lookers has said it will make

record profits of £80 million,

having taken £45 million mainly

in furlough grants but also in

business rate relief. At the time

that it was receiving its taxpayer

support, it also laid off 1,500

employees.

The Stratstone and Evans

Halshaw owner Pendragon will

also post profits of £80 million

and eclipse its previous record. It

has taken a total of £62 million in

taxpayer support for employees

but it, too, culled its workforce,

laying off 1,800 at the start of the

pandemic.

The Bristol Street Motors

group Vertu has said it will

1

The average asking price of

houses has risen by nearly

£8,000 this month, the biggest

jump in more than 20 years,

according to Rightmove. The

property portal said the average

price of a house coming to market

is £348,804, about 9.5 per cent up

from a year ago, taking the rise to

nearly £40,000 in the two years

since the pandemic started. Page 4

2

Air fares could increase by as

much as 25 per cent by the

summer because of the rising

cost of jet fuel. International fares

will jump by an average of 5 per

cent each month until June,

according to Hopper, the travel

booking app company. Page 18

3

NatWest has pledged to stop

doing business with some coal

companies and end lending to

certain oil and gas firms as part of

its commitment to tackling climate

change. James Close, the bank’s

head of climate change, said the

firms did not have “credible”

decarbonisation plans. Page 18

4

Britain’s motor dealers will

together post record annual

profits of up to £1 billion in

the coming financial reporting

season but are refusing to return

hundreds of millions of pounds in

taxpayer handouts which got them

through the pandemic. An

investigation by The Times reveals

that increasing margins from

galloping car price inflation and

staff cost-cutting will propel

almost all large motor retailers to

best-ever profits in 2021. Page 35

5

Sir Martin Sorrell, the

advertising tycoon and former

WPP boss, has highlighted the

poor performance of his S4 Capital

on the London Stock Exchange by

admitting he is considering a New

York listing for the business he

founded. Page 35

6

Lotus, one of the British

motoring industry’s great

survivors, is planning a

multibillion-pound flotation as the

Norfolk sports car manufacturer

moves to open a production plant

in China, home of Geely, the

automotive giant which controls

Lotus. Page 35

7

A long-running battle fought

by John Hargreaves, the

Monaco-based founder of

Matalan, over a multimillion-

pound tax bill has ended in defeat

at Britain’s top tax court.

8

Keith Bird, the European boss

of Marugame Udon, a

Japanese noodle bar chain

described by one of its investors as

“twice as fast as Wagamama but

half the price”, has plans to have at

least 100 outlets within five years.

Page 38

9

The property arm of the

sovereign wealth fund of

Qatar is behind some of

London’s most luxurious

developments but it could escape a

government plan for residential

developers to foot a multibillion-

pound bill to fix unsafe cladding

on properties they did not build.

Page 40

10

New taxes brought in over

the past decade have cost

British businesses more

than £50 billion and they face

more charges in the coming years.

Page 41

Need to know

A long-running battle fought by John

Hargreaves over a multimillion-pound

tax bill has ended in defeat at Britain’s

top tax court.

The Monaco-based founder of Mata-

lan has been told that he must pay capi-

tal gains tax on his sale of £231 million

of Matalan shares back in May 2000.

Hargreaves, 78, has been in dispute

with HM Revenue & Customs over his

tax status for nearly 20 years. HMRC

has been chasing him for £84 million,

although the final amount owed has

not yet been determined. Once interest

is added it could reach £135 million, The

Sunday Telegraph reported.

Hargreaves floated Matalan, the

clothes and homeware retailer, on the

London Stock Exchange in 1998.

He moved in March 2000 to Monaco.

Four days after arriving there he

submitted a P85 form to HMRC telling

officials of his tax haven status.

Court documents have revealed that

he did not fill in the capital gains pages

Tom Howard

Matalan founder loses his tax battle Champion of

small investor

raises £190m

Jessica Newman

A fintech company that enables ordi-

nary investors to access corporate

fundraisings has raised $190 million in

new funding.

PrimaryBid secured the investment

from Softbank’s Vision Fund 2. The Jap-

anese conglomerate’s fund, known for

backing technology start-ups and other

high-growth companies, provided the

funds, along with existing investors.

The proceeds of the investment will

be used to expand PrimaryBid’s offer-

ing across continental Europe and lev-

erage “key partnerships” with ABN

Amro, the Dutch bank, and Euronext.

It also plans to launch in new loca-

tions across the world, including the

United States. The company said new

executive appointments, including

Dealerships steer clear of

Shareholders in the

UK’s big car retailers

are expecting payouts

but not the taxpayer,

reports Robert Lea

Sytner Group Arnold Clark Pendragon

100p

80

60

40

20

0

2020 2021 22 22

Q1 Q2 Q3 Q4 Q1Q2 Q3 Q4Q1

25

20

15

10

5

0

2020 2021

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q1

took £45m of taxpayers

money then paid £50m

dividend

took £75m of

taxpayers money

then paid CEO £3m

took £62m of

taxpayers money then

laid off 1,800 people

Sytner Group ArnoldC

Wheeler-dealers

Cinch, a sponsor of the England cricket

teams, is owned by Constellation group

John Hargreaves

had disputed an

£84 million tax bill