Virgin Care among firms with lucrative NHS deals and a tax haven status
Richard Branson’s group is one of 10 private health providers that have tax havens as part of their corporate structure
‘Principal beneficiary’: Billionaire businessman Richard Branson.
‘Principal beneficiary’: Billionaire businessman Richard Branson. Photograph: Alan Diaz/AP
Saturday 21 March 2015 14.13 GMT Last modified on Sunday 22 March 2015 00.07 GMT
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Virgin Care, which has been handed contracts worth hundreds of millions of pounds to run more than 230 NHS and social care services, is one of at least 10 private health firms seeking state-funded contracts whose company structures include tax havens, it can be revealed.
An analysis by Richard Murphy, a chartered accountant at Tax Research UK, has found 13 holding companies, some of them offshore, between Virgin Care and its ultimate parent company, based in the British Virgin Islands.
While not currently recording a profit in the UK after administrative expenses, Virgin Care borrows money solely from a holding company and says it will repay that loan, which will be corporation tax-deductible, when a profit starts to be recorded. That holding company is based in the UK but it, in turn, owes money to other parts of the Virgin empire, whose ultimate parent company is in the British Virgin Islands. Its principal beneficiaries are billionaire businessman Sir Richard Branson, reported to have a net worth of £2.7bn, and his family.
Despite the company structure, which makes it unlikely to pay any tax in the UK in the foreseeable future, according to Murphy, Virgin Care recently won contracts worth £500m to provide 30 primary care services across England, including GP practices, GP out-of-hours services, walk-in centres, urgent care centres and minor injury units . Its website claims Virgin Care, which became part of the Virgin Group in 2010, runs 230 NHS and social care services while employing 5,500 people.
The company’s latest accounts referred to the health and social care bill – which has opened the NHS to more private providers – as an “opportunity”. Its highest-paid director earned a basic salary of £300,295 in 2013/14.
A spokesman for Virgin Care said: “As the report points out, we have not yet reached a state of profitability. The shareholders are still investing in the growth of the business. We are incorporated and resident in the UK for tax purposes and subject to UK tax law, and will meet those obligations as and when we reach profitability.”
A report from Murphy, commissioned by the Unite union, examined the tax affairs of 10 private companies which are actively seeking to take on NHS services. Of those companies – Bio Product Laboratories (BPL), Care UK, Circle, General Healthcare Group (GHG), HCA International (Hospital Corporation of America), Ramsay, Spire Healthcare, The Practice PLC, UnitedHealth (Optum) and Virgin – only two (Ramsay and HCA) pay any significant corporation tax in the UK, and all make use of tax havens in their corporate structures.
All the companies contacted said they do not use tax havens to avoid tax and claimed that when profits were earned, tax would be paid. Murphy told the Observer that while some of the companies can legitimately say they are not recording a profit, there is seemingly a “low commitment” among them to pay tax in the UK. He said: “What the structure of many of these businesses shows is that tax planning is at the very core of their activities. This is the wrong priority for companies working in the state-funded NHS, where the tax contribution everyone makes, including those who supply NHS services, is vital to the continuing health of the nation.”
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He writes in his report: “Virgin is by no means the only company to have offshore ownership. Although Spire has been reconstituted during 2014 as a UK stock exchange-quoted company, it is still controlled by a Guernsey-based private equity operation, while Bio Products Laboratory Holdings is owned from the Cayman Islands by Bain Capital, another private equity fund.
“Circle Holdings plc is another company with strong offshore links, and it is in fact itself a Jersey-registered company with a related British Virgin Islands company owning another part of the Circle operation at present.”
The report further finds that Optum UK, a subsidiary of United Healthcare, is bidding for a Staffordshire-based NHS cancer and palliative care contract worth £1.2bn. Optum’s links to tax havens including the Cayman Islands through its parent company, are not clear. However, it has not paid any corporation tax in the UK, but the company said it will do so once it becomes profitable.
Unite general secretary Len McCluskey said he was also concerned that seven of the firms, including Virgin and GHG, have US subsidiaries or investors, potentially allowing them to use a new EU-US trade deal to prevent the government blocking their future bids or terminating existing contracts. He said: “Many of these companies are US companies, or have strong US investment links, which means the government could be prevented from taking their NHS contracts back into the public sector unless the NHS is exempted from the Transatlantic Trade and Investment Partnership.”