Do companies have a duty to their shareholders to minimise the amount of tax they pay? Even if this involves engaging in complex and artificial schemes that shift profits to jurisdictions in which little or no tax is payable?
Under the 2006 Companies Act, directors of British companies are required to promote the success of the business for the benefit of its members (the shareholders). In doing so, they must have regard to six specific factors: the long-term consequences of their decisions, the interests of employees, relationships with suppliers and customers, the impact of corporate activities on the community and the environment, the company’s reputation for high standards of business conduct and the need for fairness between different members of the company.
Common tax avoidance strategies that are currently the cause of much debate and criticism involve paying interest or royalties to a company based overseas with a common parent but that may have little operational reality, or booking offshore a transaction that substantively takes place in the UK. Some people might struggle to see how these transactions promote the success of the UK company at all. But the further – and implausible – claim is not just that companies may do these things, but that they are obliged to do them.