TV3’s owners used tax structure to acquire station’s debts from IBRC

The owners of TV3 made use of a Luxembourg tax structure when buying the station's debt from the State-owned Irish Bank Resolution Corporation.

Documents seen by The Irish Times show that the London-based investment firm Doughty Hanson secured the agreement of the Luxembourg tax authorities in 2007 for a new holding company that would perform all of its future investments.

The agreement, which was negotiated by PwC Luxembourg, is an advanced tax agreement. This is the type of deal which, although legal, has been causing concern within the European Commission and has led to it mounting an inquiry into aspects of the duchy’s tax practices.

Doughty Hanson’s involvement with TV3 has led to huge losses and so the tax structure created no advantage in relation to its ownership of the station. However, the same structure is also used for significant investments by the London firm in a wide range of jurisdictions.

The 2007 correspondence from PwC to a senior Luxembourg tax official outlined the complex nature of proposed investments by Doughty Hanson from Luxembourg into a number of businesses around Europe, including TV3. The official, Marius Kohl, agreed to the tax treatment which PwC was proposing for the structure.

A 2007 investment in Setanta Sports Holdings Ltd, an Irish company, was channelled through a Luxembourg company, Tullamore, which is part of the structure dealt with in the PwC letter.

However, any tax advantages that might have arisen from use of the structure became irrelevant when Setanta’s plans in the UK failed. In 2008, Tullamore wrote off the €100 million investment in its entirety.

Losses

The losses the London investment house has made over the years from its involvement in TV3 are outlined in the latest consolidated accounts for Tullamore filed in Luxembourg. The group’s accumulated losses at the end of 2013 were €240.8 million.

The accounts show that Tullamore made a profit of €7.3 million in 2013, from a net turnover of €56 million. The group would have paid Luxembourg corporation tax of €2.1 million were it not for the fact that €2.6 million of the profits were not taxable. This, along with losses brought forward, and other issues, reduced the tax charge to €6,000, according to the accounts.

In December 2013, Tullamore acquired the debt it owed to the State-owned Irish Bank Resolution Corporation, for €8.9 million less than the value of the debt on the company’s books.

The debt had originally been due to Anglo Irish Bank, the loans of which were subsumed into the IBRC. The debt was bought on an open auction basis from the liquidators of the IBRC, according to the Tullamore accounts.