Private travel company owners using tax avoidance schemes could unwittingly be devaluing their own companies should they be tempted to put them up for sale.
Business analyst Plimsoll Publishing has warned in a recent report that practices such as paying additional large fees to directors – an entirely legitimate way of minimising taxable liability – can leave owners unable to prove the true value of their company.
Plimsoll senior analyst David Pattison is concerned the problem is particularly prevalent in the travel industry, where 592 of the 1,000 top revenue-generating companies are privately owned.
Pattison said private companies in the UK typically pay out about 80% of their profits as additional fees to directors as they don’t have to pay shareholders and can avoid paying the additional tax on these amounts.
He added: “With the help of professional advisers, private businesses have become very adept at hiding their worth. When they go to sell, there simply isn’t the evidence to support a high asking price.
“Potential buyers will always make a low offer in this situation because they simply won’t believe a company’s own unsupported figures.”
However, Association of Independent Tour Operators deputy chairman John Gillies said: “Anybody actually looking to buy a company would very quickly and easily discover these fees as they are not hidden away, so the true value of the company is easily asserted.”
More details on the Plimsoll report are available from Clair Sherwood on c.sherwood@plimsoll.co.uk.