Multimillionaire Sir Richard Branson has been told that the government is not prepared to hand out a £500m bailout loan for Virgin Atlantic, the airline in which he owns a minority 20% stake, with majority shares held by EU and US owned carriers
The plea for British government financial support for Virgin Atlantic, a relatively small airline in the aviation world when compared with major players like British Airways, Singapore Airlines and Qantas, has been rejected. Early in the crisis BA took drastic action cutting pilots' pay by 50% and furloughing a large number of crew and staff.
Originally set up by Branson in the 1980s, he now owns only 20% through his Virgin Group vehicle, and the remaining 80% is owned primarily by US carrier Delta as the largest shareholder with 49%
came as the world faces global lockdown measures which have closed international borders, stopped all but essential flights and seen many hotels voluntarily given to the NHS for use as staff accommodation.
As the global airline industry is grounded by the covid-19 pandemic, with less than 10% of the normal flight traffic into London Heathrow Airport for example, Branson has asked the British government to take his luxury private Caribbean island, a 30-hectare island in the British Virgin Islands, which he personally owns, as collateral.
The luxury island resort costs over £50,000 a day to rent for up to 34 guests and is part of the Virgin Limited Edition luxury hotel group, although viable bookings will be rather limited for quite some time due to the current global border closures, lockdowns and immigration entry bans, which are likely to stay in place for several months.
In light of the coronavirus pandemic sweeping the world, and the UK taxpayers’ ultimate £700bn and rising bill for the covid-19 crisis, it is hard to see how the Treasury could justify the expense ‘as a reasonable use of taxpayer money’ since it is not even located in the UK.
As a collateral asset, it has limited appeal for the UK government as it would only be usable by high net worth or ultra high net worth tourists and does not have a commercial airport or even any semblance of substantial hotel infrastructure.
The government does have a few 'grace and favour' properties such as the prime minister's official country house, Chequers, which is sometimes used for government meetings and hosting important dignitaries.
It is a 16th century manor house in the Chiltern Hills in Buckinghamshire, a short distance from London, number 10 likewise is designated for the PM and they are expected to live there although the space is not necessarily what they are 'accustomed to' in terms of their rather more typical London homes and country houses.
Chequers is where the PM, Boris Johnson went to convalesce after his covid-19 attack which saw him taken into hospital in an NHS ward and then intensive care unit (ICU) at St Thomas' Hospital - Tommy's, near Waterloo station in London just south of the river.
St Thomas' is part of Guy's and St Thomas' NHS Foundation Trust. It is worth noting that private hospitals do not have intensive care facilities or the very specialised nursing and medical care required to deal with any major trauma, RTA or as we now know the covid-19 strain of the coronavirus.
So the idea of the government accepting a luxury five star palatial house and island as collateral was met with understandable astonishment in some quarters.
It also raised a number of tax and cross-border jurisdiction issues, not to mention the EU's tax haven list. All of these rules are likely to become less easy to flout now that the world is in global covid-19 lockdown.
The group’s ultimate holding company, which Branson and his family control, is based in the British Virgin Islands (BVI), which does not charge corporation tax, and claimed Branson has not personally paid tax in the UK for the past 14 years.
Branson has stated that any money would be lent on commercial terms and repaid.
He has also stated that Virgin companies all pay tax in the countries they operate in, and lives on Necker because he loves the BVI.
EU list of non-cooperative jurisdictions for tax purposes
As of February 2020, the countries on the EU list of non-cooperative jurisdictions for tax purposes are American Samoa, Cayman Islands, Fiji, Guam, Oman, Palau, Panama, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu and Seychelles.
This list was first created in 2017 and the most recent additions are Cayman Islands, Palau, Panama and the Seychelles.
The EU has removed 16 jurisdictions from the list, after declaring they have implemented all the necessary reforms to comply with EU tax good governance principle. They are (Antigua and Barbuda, Armenia, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cabo Verde, Cook Islands, Curaçao, Marshall Islands, Montenegro, Nauru, Niue, Saint Kitts and Nevis, and Vietnam.
By Sara White, Editor, Accountancy Daily