Jersey link could mean stamp duty saving in Asda share deal

Wednesday 13 March 2024

Any potential purchaser of Asda stands to make a significant stamp duty saving due to parts of the business being structured through Jersey, it has emerged – as one of the billionaire brother owners of the grocer reportedly prepares to sell his stake for £500m.

Alongside buyout group TDR Capital, Zuber and Mohsin Issa bought Asda back in 2021 from the US firm Walmart in a deal worth £6.8bn.

But amid troubles for the grocer – which last year was revealed to be carrying debts of more than £4bn – it's now been reported that Zuber Issa is seeking to offload his stake.

The Sunday Telegraph reported that he was hoping to sell his 22% shareholding for around half-a-billion and had approached private equity firms and retailers.

Anyone who buys shares would normally pay a tax of 0.5% on the transaction in the UK.

However, following questioning from MPs concerned about governance and debt at the Asda, Mohsin Issa CBE recently confirmed in a letter that there may be a "saving" for any future purchaser of shares in Britain's third largest supermarket chain.

This is because "they would not be required to pay stamp duty on the acquisition of shares in entities incorporated in Jersey, as they would if they acquired shares in a UK company", he told Liam Byrne, who leads the House of Commons' Business and Trade Committee.

Pictured: The letter from Mr Issa to the Business and Trade Committee confirming the Jersey links and potential stamp duty benefit.

Mr Mohsin, who has been running Asda in the absence of a CEO since 2021, had previously been asked to give evidence in person on two occasions.

One appearance led to an accusation that he had "misled" Parliament by submitting evidence containing errors about the supermarket chain's offshore ownership structure.

The letter said that three companies – Asda Group, Asda Stores and McLagan Investments – were Jersey-domiciled when they were based in the UK.

Several other key entities in the structure were confirmed to be based in Jersey, however.

The Issa brothers have always maintained that this was not for tax reasons, and said that the error was administrative.

The Jersey entities are not obliged to provide public accounts under local law.

However, during a grilling in December, Asda's CFO Michael Gleeson told the Committee that he would hand them over for scrutiny.

In his letter, Mr Issa reaffirmed that he would be "very happy" to provide the accounts for seven Jersey entities "in private".

"We would like to take this opportunity once again to confirm that no companies in the Asda ownership structure are incorporated in jurisdictions outside of England and Wales to seek to avoid paying tax on their income through any favourable tax status," he said.

"All of the companies are UK tax resident regardless of where they are incorporated, they each file UK corporation tax returns and are liable to pay UK corporation tax on their profits in accordance with UK tax legislation.

"We can confirm that Asda's holding structure being incorporated in Jersey was not designed to reduce current or prospective tax liabilities for Asda or its current owners."

Many of the Jersey companies carry the name 'Bellis', while others contain the word 'Phantom'.

The latter led Labour MP Charlotte Nichols to ask back in December: "You don't believe it's bad PR when you're asking us to trust the business to have a section of your investment structure that is named something that is synonymous with lies, deception and deceit in calling it 'Phantom?'"

Helen Selby, Asda's Company Secretary, replied: "I see it as a word. I don't look beyond it."

Recent news of a potential sale of Zuber Issa's shares followed a revelation that his brother was in a relationship with a former partner at EY, which was Asda's auditor.

This only emerged after it came to light that EY had quietly resigned as Asda auditors at the end of July 2023 after Asda bought filling stations chain, EG Group, whose parent company is Optima Bidco (Jersey) Limited.

Its UK operations include around 350 petrol forecourts and 1,000 takeaways, which together employ more than 13,000 people.

"Following the acquisition of Euro Garages (Jersey) Ltd and the timetable requirements of the audit, we mutually agreed with the board to stand down as auditors for the group," EY said.