Thursday 26 July 2012
MARSTON'S RETAIL AGREEMENT.
The recent furore over the legalities and moralities involved in the payment of taxes is something I find a little bewildering. It is surely illegal to evade taxes, that is, to deliberately falsify accounting records so as to reduce one's tax bill, but it is not illegal, nor in my mind immoral, to use lawful means to achieve the same end. If the tax man doesn't like it, he can always act to close so-called loopholes in tax law, otherwise he, and others, should keep quiet.
While all this fuss is going on, we have to remember that HMRC routinely enters into arrangements with major companies which reduce their tax bills. According to yesterday's 'Daily Mail' neither Google nor Vodafone pay much, if any, tax in this country as a result of accounting arrangements which HMRC must have approved. Similarly, I'm aware of a scheme being operated by the brewing and pub operating company, Marston's, which seems to break all of the rules while apaprently having been given the 'green light' by HMRC.
Under what they call their 'Retail Agreement' Marston's enters into purported tenancy agreements with pub landlords under which the landlords are supposedly self-employed and running their own businesses. Marston's pays all of the pub bills except for staff costs and the council tax for the associated residential element of the property, and simply take back about 80% of the pub's net takings after VAT. Marston's say that they will be responsible for all building maintenance and that they will ensure the properties are maintained in an excellent state of repair. So far, so good.
However, Marston's is also the sole supplier to the pub business and can determine the levels of stock to be maintained; astonishingly and despite this, the cost of stock that becames unsaleable, for example, real ale beyond its shelf life, is a charge to the retailer. Marstons also sets all of the retail prices through their computerised stock control and till system; I'm even aware of prices having been changed without any notice being given to the landlord. Marston's provides a degree of training, though very little as far as I can tell, and landlords have to agree a business plan with Marston's and are subject to close managerial oversight from them. Marston's determines the opening hours of the business and the pubs have to be operated strictly within rules laid down in accordance with an Operating Manual provided by them. All takings have to be paid into a Marston's bank account every 2 or 3 days and the landlord is required to submit a weekly invoice in order to claim their share. The sole source of income for the landlord is Marston's.
Marston's would no doubt argue that the agreement actually gives the landlords more say than this but, in practice, it does not. Marston's operates these outlets as if they were managed houses and the landlords were their employees, while claiming they are not. This allows Marston's to avoid paying the minimum wage and to avoid paying National Insurance; they also have no responsibility for any staff employed in the pubs, even though such staff appear to be employed using Marston's stationery and are paid through Marston's payroll system.
When it comes to buildings maintenance, Marston's are to say the least reluctant to spend any money. One local pub of my acquaintance has a kitchen which has been condemned and another has one that is wholly unsuitable; Marston's are unwilling to do anything about these situations, meaning that the landlords are unable to develop their businesses in ways that they might wish. Both pubs have other maintenance issues that Marston's have refused to deal with. In one case, the landlord was driven to call in the local environmental health officer in order to compel the company to fulfil its obligations; that landlord has now been given notice. Pubs on this agreement which are able to sell food are tied to menus and products supplied by Marston's.
Where all this leaves us is with an arrangement, presumably approved by HMRC, which allows Marston's to avoid paying the minimum wage, avoid paying national insurance and avoid the other responsibilities of employing staff. That the arrangement is in flagrant violation of HMRC rules governing what is and what is not self-employment is blatantly obvious. The earnings of the landlord and his family are generally such as to entitle them to claim tax credits to a significant extent, meaning that the tax payer is also subsidising this arrangement to Marston's benefit. The landlords I have spoken to also seem blissfully unaware that their free accommodation should quite probably be treated as a taxable benefit, this not being something that Marston's have highlighted, and declared on their tax returns and tax credit claims.
Is this right ? Is it moral ? Indeed, is it legal ? Is this just a tax and responsibility avoidance measure ?