Vivienne Westwood accused of hypocrisy over offshore tax base

Vivienne Westwood’s donation of £300,000 to the Green Party sparks controversy over her company’s use of off-shore account

She is probably Britain’s most influential — and definitely most controversial — fashion designer.

So perhaps it was inevitable that when Dame Vivienne Westwood became the Green Party’s biggest supporter with a £300,000 donation, it would cause a furore.

For Dame Vivienne is now accused of hypocrisy over tax avoidance allegations that put her in direct conflict with one of the Green Party’s main policies.

The most recent company accounts show Dame Vivienne’s main UK business is paying £2 million a year to an offshore company set up in Luxembourg for the right to use her name on her own fashion label.

Tax experts have described the arrangement as “tax avoidance” that cheats the UK Treasury out of about £500,000 a year. The model is similar to one used by Starbucks, the coffee chain, which found itself at the centre of a protest over its use of Luxembourg to reduce its tax bill in the UK.

The Green Party is calling for a Tax Dodgers Bill that would outlaw such payments to offshore companies in jurisdictions including Luxembourg.

In a manifesto promise made on February 13, the Green Party pledged “to introduce a Tax Dodging Bill in the first 100 days after the election”.

It added: “Green Party policy is to crack down heavily on tax havens and other methods of tax evasion and avoidance, and press for a transparent country-by-country reporting so that company profits can be located and taxed.” The Green party pledge was made a month after Dame Vivienne said she would be donating £300,000 to the party.

One City accountant, who studied the accounts of Vivienne Westwood Ltd, said: “This has to be tax avoidance. Why else would you make these payments to a company in Luxembourg? It makes the Green Party hypocrites for taking her money and Westwood a hypocrite for backing a party with policies she does not appear to endorse.”

Jolyon Maugham QC, a leading tax barrister, said: “What’s odd about Ms Westwood’s arrangements is that the rights were held in the UK, but were then transferred out of the UK. The transfer means that the fee is no longer subject to UK tax. And that’s tax avoidance by any sensible definition.”

In 2002, Dame Vivienne’s UK business sold the rights to her trademarks to Luxembourg-based Latimo SA, which she also controls, for £840,000.

A year later Latimo SA became “the ultimate parent company” of the UK business by “virtue of its acquisition of the entire share capital”.

Accounts for the year ending December 31, 2013 show the company paid just over £2 million to Latimo SA for “licence fees” and a further £2 million the year before.

By paying the money to Latimo, the profits of Dame Vivienne’s UK business have been reduced by £2 million a year. In 2013, the UK company registered an operating profit of £3.2 million and a corporation tax bill on that of £780,000 – about a quarter of the operating profit. By paying her Luxembourg company £2 million, the UK company avoided paying an additional £500,000 to the UK Exchequer.

The accounts show the company paid her no dividend and that its two directors – one of them Dame Vivienne – shared a remuneration package of just £56,000.

Dame Vivienne, 73, who was in Paris at the weekend for the showing of her autumn/winter collection at Paris Fashion Week, urged voters to go green at London fashion week.

“I am investing in the Green Party because I believe it is in the best interests of our country and our economy,” she said. “I hope that by example other individuals and businesses will follow suit.”

The company stated: “Vivienne Westwood Limited is part of an independent international Group of companies. Latimo SA is the holding company of this group which owns and protects the Vivienne Westwood trademarks worldwide. Vivienne Westwood Ltd pays regular royalties to Latimo SA pursuant to a Licence Agreement.

“Vivienne Westwood Ltd and all the companies belonging to the group pay all the required taxes in all the countries in which they trade or operate, in accordance to audited financial statements.

“All British entities based in the UK paid the required taxes. Within the UK, Vivienne Westwood Limited paid £780,228 of taxes in 2013 and £1,250,858 of taxes in 2012.

“Profits, as per the decision of the Board of Directors, were invested in the structure and in the international development of the company.

“The donation of £300,000 to the Green Party was made by Dame Vivienne Westwood personally and not by the Vivienne Westwood Group.”