Fashion giant Gap defends itself over 'opaque' tax practice claims

New analysis by insolvency practice Opus Restructuring suggests Gap has been transferring profits between its UK businesses and its parent company in San Francisco.   

Although the strategy is legal and does not amount to tax evasion, the move has cut its potential liability to HM Revenue and Customs, the Evening Standard reported. 

The retailer has also allegedly paid almost no corporation tax – after rebates are taken into account – on its UK business since 2011, the paper reported. 

Gap, which was founded in San Francisco in 1969, has 132 UK stores and turns over more than £300m. It also owns Banana Republic, which has eight UK outlets.

Nick Hood, Opus Restructuring’s business risk adviser, told Retail Week: “It’s not for retail pundits to comment on the legality, morality or ethics of the tax affairs of multinationals.

“But what is far more worrying is the negative effect these types of arrangements have on UK-only retailers and in particular independents, who suffer from a major competitive disadvantage as a result.

“It’s time for our politicians and lawmakers to level out this playing field.”

In a statement, Gap said: “Gap Inc is committed to operating according to and complying with all multinational tax laws.

“We maintain an open and transparent dialogue with regulators in jurisdictions where we operate.

“We are a taxpayer in good standing in the UK, and have transfer pricing agreements with tax authorities in the UK and the US covering business activities between our entities.

“Our global effective tax rate has averaged approximately 39% over the past decade, and we have paid almost $7bn (£4.85bn) in taxes during this time.”

HMRC said in a statement: “Multinational companies must pay the tax that is due and we do not accept less. HMRC enforces the rules impartially, irrespective of the size or structure of the business. Last year our compliance activities yielded £26bn in extra tax.”