Dubai's DP World loses $21m UK tax case

Subsidiary company found to have created artificial tax credits

Dubai-based global port operator DP World has lost a UK court battle to avoid paying £14m ($21.4m) in tax.

P&O, a cruise and ferry business now owned by DP World, was independent in 2004 when it created “an elaborate trick” to reduce its UK tax bill.

DP World, which bought the company in 2006 for £3.9m, unsuccessfully appealed the tax authority’s rejection of the scheme, which was described as "a scripted game of charades". 

Known as the "Dear Simon scheme" after a letter at the centre of the case, it was designed to exploit international treaty rules that prevent companies from being taxed in two jurisdictions.

P&O was found to have created artificial UK tax credits for tax payments made by Australian subsidiaries in October 2004.

“It is clear that the scheme would only work so long as every participant in it was either a captive company or a stooge employee of a company within the P&O group,” the tribunal judge, Sir Stephen Oliver QC, said.

"The Dear Simon scheme was designed and implemented for no reason other than tax avoidance. "It depended on the alchemy of turning share capital into distributable reserves almost overnight. The trick was written into the script of the charade."

The verdict is based on legislation that was repealed in 2005.

DP World, the third largest port operator globally and owner of Jebel Ali Port, said it would appeal the tribunal’s verdict.

“This decision relates to a dispute between P&O and HMRC (HM Revenue & Customs) about the double tax treatment of profits repatriated to the UK in 2004, before we acquired P&O in 2006,” a statement says.

“This technical debate involves complex 2001 legislation that has now been repealed. Since the transactions took place there have also been changes to the corporation tax rules on dividends and distributions, with Parliament and HMRC recognising that the law was impractical and unfair, and any company can now repatriate profits from its subsidiaries abroad without giving rise to the problems in this case.

“In light of these facts, we have filed an application for permission to appeal the decision.”

The UK Treasury claims it has recouped £1bn worth of historic unpaid tax by international companies so far this year.

Join the Discussion

Disclaimer:The view expressed here by our readers are not necessarily shared by Arabian Business, its employees, sponsors or its advertisers.

NOTE: Comments posted on may be printed in the magazine Arabian Business

Please post responsibly. Commenter Rules

  • No comments yet, be the first!

All comments are subject to approval before appearing

Further reading

Features & Analysis
After all the hype, what's the future for Hyperloop One

After all the hype, what's the future for Hyperloop One

Los Angeles-based Hyperloop One may have struck a deal this month...

Focus: Gulf airlines face looming growth threat from 'protectionist' Trump government

Focus: Gulf airlines face looming growth threat from 'protectionist' Trump government

Election of Donald Trump, one-time owner of now-defunct East...

Smart move: Automated transport in the Gulf

Smart move: Automated transport in the Gulf

In a few short years how we get from A to B will be dramatically...

Most Discussed
  • 3
    UAE landlords set to get tougher on rental cheques

    Article is pointless - There will be no recovery in the rental market for 3 yrs minimum - we haven't seen anything close to the bottom of this - this time... more

    Tuesday, 28 February 2017 1:21 PM - Lord Wilson
  • 2
    Dubai residents appeal to fix 'roundabout of doom'

    These 2 roundabouts (Arabian Ranches/Motor City & Studio City) are mostly choked and always dangerous, because of Schools, Offices and fast growing Residential... more

    Tuesday, 28 February 2017 1:22 PM - Anon
  • 2
    UAE salaries expected to rise, report says

    Nowadays people are struggling to secure a job in market and they are accepting offer which is less from their current package there is no chance of salary... more

    Tuesday, 28 February 2017 1:21 PM - Daljit Singh