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Tax experts claim taxpayer will 'subsidise' Morrisons takeover

Tax experts have claimed the British taxpayer will 'subsidise' the £7billion private equity takeover of Morrisons as investors prepare to vote through the deal tomorrow. 

US firm Clayton Dubilier & Rice is expected to be confirmed as the grocer's new owner at a price of 287p per share after a four-month bidding war. 

But MPs and tax campaigners last night said the deal 'stinks' and will likely result in Morrisons paying less tax to the Exchequer. 

Concern: MPs and tax campaigners said the deal 'stinks' and will likely result in Morrisons paying less tax to the Exchequer

Sir Terry Leahy, 65, who led the CD&R bid, wrote to an MP last week seeking to provide assurances that Morrisons 'will remain a British business, registered and headquartered in the UK'. 

Experts said this was only partly relevant as they raised a red flag over the financing of the deal. 

Richard Murphy, of Sheffield University Management School, said: 'If CD&R put the debt on to Morrisons to buy it, then the profits are reduced due to the interest payments sent offshore. 

'The Government will be subsidising this if there is debt involved. Is that a good use of taxpayer money?' 

George Turner, from research group Tax Watch, said: 'No one is suggesting that the owners will be moving the supermarkets to the Cayman Islands. 

'The issue is that taxable profit in UK businesses can collapse after a takeover by a private equity fund.' 

Tax deductions for debt interest, paid to banks and bondholders, are available for all companies in the UK. But private equity companies borrow billions of pounds to fund large acquisitions, rather than fund operations or company growth, which are offset against profits, reducing the amount of corporation tax paid into the Treasury. 

Veteran MP Margaret Hodge, 77, who has long campaigned against tax avoidance, said: 'This deal simply stinks. I urge the Government to ensure that the taxpayer is not getting ripped off.' 

Sir Terry was boss of Tesco in the late 2000s when it admitted using offshore structures to avoid stamp duty. 

Morrison's chairman Andrew Higginson said the winning CD&R offer 'represents excellent value for shareholders' and protects the 'fundamental character of Morrisons for all stakeholders'. CD&R declined to comment.