Rolls-Royce paid no UK corporation tax in 2012 Published duration 4 March 2013

image caption Rolls-Royce produces engines for air, sea and land

International engine builder Rolls-Royce did not pay any corporation tax in the UK in 2012, its annual report has revealed.

The firm, which employs 12,000 people in Derby, reported a record year for profits but paid nothing to the treasury and received £3m in credit.

It said most of its sales were abroad and its tax liability was reduced because of its investment in research.

MPs said companies had an obligation to pay tax if they were making a profit.

Rolls-Royce's annual financial statement, released in February, shows it made £1.4bn in pre-tax profit in 2012, an increase of 24% on 2011.

Foreign tax bill

But for the second year in a row its tax bill in the UK remained at zero, with the company receiving £3m in credit.

The firm refused to be interviewed but told the BBC most of its sales were abroad and its tax bill reflected this.

According to its records, last year Rolls-Royce paid £218m in taxes abroad where it said it conducts 85% of its business.

And it said its tax liability was reduced because of the millions it spends on research and development.

Chris Williamson, Labour MP for Derby North, said he had written to the chief executive of Rolls-Royce for more information.

He said: "We do need to get to the bottom of the story. All companies, irrespective of how many people they employ, have an obligation to pay tax if they are making profits here.

'Fair share'

"We have to remember that successful companies in the UK are successful partly because of the investment that's made in public services, in education, in infrastructure to enable them to flourish."

Labour's John Mann MP, who campaigns on tax issues, said: "There is no reason for Rolls-Royce, or any other company, not to be paying their fair share.

"That's where the HMRC needs to use the powers it's got properly, but also if it thinks it needs more powers and changes in the law [it needs] to come forward."

Economist Richard Murphy, director of campaign group Tax Research UK, said it did not appear to be fair that a profitable company was not paying any UK tax.

He said: "Legality is not the question. The big question is, is it right, is it fair and we have got the proper tax system?"

A spokesman for HMRC said: "HMRC ensures that multinationals pay the tax due in accordance with UK tax law.

"We have been very successful in reducing tax avoidance by large businesses in recent years.

"We relentlessly challenge those that persist in avoiding tax and have recovered £29bn additional revenues from large businesses in the last six years, including £4.1bn in the last four years from transfer pricing enquiries alone.