For those who found the vintage Chateau Lafleur at ¬£1,600 a bottle not quite British enough there were pints of Lancashire ale poured by flat-capped barmen at a mock pub called The Frack Inn.
The lavish event on 6 December 2016 at Ineos‚Äôs new headquarters in London was a conspicuous display of patriotism. Invitations bore Union Jacks and the theme was red, white and blue, all to celebrate the British-born chemicals giant‚Äôs return to the UK after six years of tax exile in Switzerland.¬†
‚ÄúWe are Brits, aren‚Äôt we? It‚Äôs where we started and it‚Äôs where our hearts lie,‚ÄĚ said Ineos‚Äôs pro-Brexit billionaire owner, Sir Jim Ratcliffe. The 68-year-old painted the move as a vote of confidence in an economy reeling from the summer vote to leave the European Union.
Ineos‚Äôs homecoming burnished Ratcliffe‚Äôs reputation in Britain. It was the first step in a campaign by the chemicals company‚Äôs founder to transform his image from a little-known businessman into a high-profile supporter of sport, charity and Brexit.
After years spent shunning the limelight, Ratcliffe began courting government ministers, poured hundreds of millions of pounds into British cycling and sailing teams, and revealed plans to build a successor to Land Rover‚Äôs iconic Defender, which he said could create 10,000 British jobs.¬†
The campaign seemed to work. In July 2018, just over a year after Ineos‚Äôs return to London and two months after the Sunday Times Rich List declared him Britain‚Äôs wealthiest man, Ratcliffe was knighted in the Queen‚Äôs Birthday Honours list for services to business.
Now an investigation by Tortoise and SourceMaterial has found that the reality of Ineos‚Äôs repatriation might be somewhat less patriotic than Sir Jim has made out.¬†
Not only have high-profile projects such as the Land Rover replacement been shifted abroad but Ineos as a whole has paid less tax proportionately in Britain since its return. Since 2016 the group has paid only about ¬£67 million a year to the Treasury ‚Äď at the same time moving hundreds of millions of pounds offshore.¬†
It isn‚Äôt just corporate profit that Ratcliffe has moved out of the UK. Just months after the Frack Inn bash, he and a key lieutenant began scouting for residential properties in Monaco. The Ineos billionaire has subsequently declared Monaco to be his primary place of residence on financial forms filed in the US and in Britain.¬†
The move offshore, while perfectly legal, could have profound consequences, enabling Ratcliffe to accept billions of pounds in future Ineos profit completely tax free.¬†
British citizens who base themselves offshore are normally not permitted to receive honours. Our evidence suggests that Ratcliffe‚Äôs plan to move to Monaco, which only became public after he was knighted in June 2018, was set in motion well before that date.¬†
A source close to the honours committee, the 14-strong group which reviews nominations for honours such as OBEs and knighthoods,¬†told us that Ratcliffe may well never have been knighted had the Monaco move been known.
‚ÄúHe came back to Britain and was duly promoted and everyone said this was great because he was one of the biggest self-made entrepreneurs. Then when he buggered off I personally was incandescent,‚ÄĚ the source said. ‚ÄúIf we‚Äôd known that he was going back, he wouldn‚Äôt have got it.‚ÄĚ¬†
It‚Äôs an episode which could alter how Britain recognises and rewards its wealthiest citizens for good.¬†
The source told us that the body‚Äôs economy subcommittee ‚Äď one of ten units that reviews recommendations for awards submitted to the Cabinet Office ‚Äď has since inserted a new clause into its procedures allowing it to refer recipients who decamp to tax havens to the forfeiture committee, which has the power to rescind honours.¬†
The new rule, the source told us, is known internally as the ‚ÄúRatcliffe clause‚ÄĚ. A cabinet office spokesperson denied that any formal changes had been made to forfeiture rules and said: ‚ÄúAny new or existing forfeiture policy is considered first by the independent Forfeiture Committee, and then the advisory [Honours, Decoration and Medals] committee.‚ÄĚ
Fracking for plastics
In just over two decades, Ineos has quietly and rapidly expanded to become a titan in petrochemicals. Founded in 1998, Ratcliffe‚Äôs creation is now a sprawling network of some 400 subsidiaries, including one which owns a pipeline delivering 40 per cent of the UK‚Äôs North Sea oil output. Its annual sales of over $61 billion are equivalent in size to the economy of a mid-sized country like Costa Rica or Oman.
Despite its size, many of Ineos‚Äôs finances remain unavailable to public scrutiny as Ratcliffe has kept the company private. Unlike public companies, private companies have far less stringent filing requirements.¬†
Once labeled ‚Äúthe biggest company you‚Äôve never heard of‚ÄĚ, Ineos and its brand are now everywhere. In 2019, Tour de France-winning Team Sky became Team Ineos, while the runner Eliud Kipchoge broke the two-hour marathon barrier under the Ineos flag. A year earlier, Ratcliffe handed a ¬£110 million funding package to Sir Ben Ainslee‚Äôs British yachting team. And in 2020, Ineos rose above other Formula 1 sponsors to become a third-shareholder in Mercedes Formula 1 in a deal thought to be worth ¬£100 million.¬†
To its supporters, Ineos‚Äôs funding has been transformative. Ratcliffe has flown Mercedes F1 engineers to New Zealand to help Sir Ben compete in the America‚Äôs Cup this month, for instance. (On Sunday, Ainslee and Ineos were knocked out of the competition by their Italian rivals.) For Ineos‚Äôs critics, however, the big-name sports sponsorships are proof that Sir Jim is ‚Äúsports-washing‚ÄĚ his oil and gas company‚Äôs reputation.
‚ÄúIneos is about fracking, plastics and pollution of our climate and oceans,‚ÄĚ Jen Robinson, a barrister representing environmental campaigners, wrote to Kim Anderson, the world sailing president, in 2018. ‚ÄúYour decision to permit the participation of any team sponsored by INEOS undermines World Sailing‚Äôs commitments to respecting and safeguarding our environment.‚ÄĚ Despite the protests, Ineos was permitted to carry out the sponsorship.¬†
A legendarily tough negotiator, Jim Ratcliffe has never been one to back down from a threat.¬†
In 2010, hard-hit by the financial crisis and battling for survival, Ineos asked the British government for a grace period to pay a VAT bill of ¬£350 million. When it refused, Ratcliffe and his executives paid the bill and packed their bags for Rolle, on the shores of Lake Geneva.¬†
Ineos remained in Switzerland for six years, costing the Treasury hundreds of millions of pounds in lost tax. Only when a new business-friendly Conservative-led government unveiled plans to cut corporation tax from 20 per cent to 17 per cent was Ineos lured back to London amid a wave of publicity.
‚ÄúOur new base in London reflects our British roots,‚ÄĚ Ratcliffe said in 2016. ‚ÄúWe have immense confidence in Britain‚Äôs economic future. The current business climate makes siting our new headquarters in the UK an easy decision.‚ÄĚ
Those listening to Ratcliffe might have taken his words to mean that Ineos would pay considerably more tax in its new home country.¬†
Close examination of Ineos‚Äôs finances tells a different story. Despite the grand opening in Knightsbridge, the company did not fundamentally alter its corporate structure. It simply added an Isle of Man entity, Ineos Limited, on top of the previous parent company in Switzerland, Ineos AG. One secretive offshore company had effectively been superseded by another.
Since then, the tax Ineos pays in the UK appears barely to have changed. The company paid an average of ¬£39 million a year in UK tax during its Swiss exile. After returning, it has paid an average ¬£67 million, according to estimates based on a review of more than 100 Ineos UK subsidiaries. Ineos says it made a global profit of ¬£4.3 billion in 2019 before interest payments, tax and other charges are deducted.
How much tax does Ineos pay? And how much does it pay in Britain?
It is a simple question that lacks a simple answer. While big companies quoted on the stock market, like¬†BP¬†or¬†BHP Billiton, produce glossy ‚Äútaxes paid‚ÄĚ reports detailing their contributions to state coffers across the world, Britain‚Äôs biggest privately-owned company has no equivalent. Nor does it publish a single set of accounts for the whole business.
To estimate Ineos‚Äôs UK tax bill we looked at the accounts of every UK subsidiary we could find, more than 100 of them, making sure to avoid double-counting.
But we also wanted to put that figure in context. So to get an estimate for how much tax Ineos paid over all, we looked at the best ‚Äúconsolidated‚ÄĚ accounts available to us before the corporate hierarchy reaches secrecy jurisdictions like Switzerland and the Isle of Man. (Consolidated accounts are those of a group of companies that tally up the accounts of the subsidiaries.) These consolidated accounts cover the vast majority of the Ineos empire.
In the final reckoning, we estimate Ineos paid corporation tax in 2019 of about ¬£75 million in the UK ‚Äď a figure less than the ‚Äúmanagement fees‚ÄĚ its businesses send to low-tax Switzerland ‚Äď and about ¬£300 million globally.
Proportionally, the amount paid by Ineos in the UK has actually decreased from 22 per cent during the years of Swiss exile to just 13 per cent in the three years since its return for which figures are available.¬†
How has Ineos kept its tax bill so comparatively low? Our investigation revealed a pattern of intricate strategies to shift profits towards low-tax jurisdictions. While the measures are all legal, critics say they have allowed Ratcliffe to have his Brexit cake and eat it: to project himself as the patriotic businessman while moving billions in taxable wealth offshore.
One mechanism Ineos uses to move money to low tax jurisdictions is the ‚Äúmanagement fees‚ÄĚ it pays Ratcliffe and Ineos‚Äôs two minority shareholders, Andy Currie and John Reece (both billionaires in their own right).
Since the 2016 move back to London, Ineos has paid the trio nearly half a billion pounds in fees ‚Äď more than twice what the company paid over the same period in UK tax ‚Äď via an entity in Switzerland, corporate filings show. The effect has been to reduce the amount of taxable profit declared by the UK companies.¬†¬†
And despite the move to London, Switzerland is where Ineos continues to register much of its intellectual property. Since formally opening its UK headquarters, Ineos has not applied for a single patent from the UK.¬†
Switzerland, meanwhile, has accounted for about a fifth of the company‚Äôs patent applications even since the repatriation, meaning that millions in royalties on Ineos‚Äôs patented technology can be routed offshore rather than taxed in the UK ‚Äď even in cases where the engineers who developed the technology are British.
Ineos has also continued to declare profits from other parts of its business in Switzerland even after moving its headquarters back to London.¬†
Its Styrolution business, for example, sells more than ‚ā¨5 billion of plastics like polystyrene a year. Of more than 2,000 employees with LinkedIn accounts that work for Styrolution around the world, just 12 say they are in Switzerland, an analysis of the website suggests. Yet Switzerland is where Ineos has booked 60 per cent of the group‚Äôs profit in the last two years.
LinkedIn is at best an indication of where employees are based, it is not a company HR roster, but by routing the sales through a Swiss entity, Ineos Styrolution SA, the group appears to divert cash to a low tax jurisdiction and away from the countries where the profit was arguably generated. Our analysis suggests that this structure saved at least ‚ā¨70 million in corporate tax in 2017 ‚Äď mostly in countries such as Germany.
‚ÄúOne of the basic principles of international taxation is that taxes should be applied where economic activity takes place,‚ÄĚ said George Turner, director of Tax Watch UK. ‚ÄúCompanies should not be able to simply move profits offshore by shifting paperwork.‚ÄĚ
Other potentially aggressive ‚Äď but legal ‚Äď methods used by Ineos to lower its tax bill include shifting ‚ā¨632 million to a convoluted corporate structure in the island tax haven of Malta, a move that could have saved the company around ‚ā¨200 million had the EU not intervened to close that particular loophole first.¬†
Ineos declined to answer our questions about the details of its tax arrangements. ‚ÄúThe UK Group does not engage in artificial transactions the sole purpose of which is to reduce UK tax,‚ÄĚ Ineos says in legal information on its website.¬†
An Ineos spokesman said: ‚ÄúIneos is a large business with entities in many geographies and jurisdictions. It is legally compliant everywhere it trades and it pays all taxes due,‚ÄĚ Responding to questions about Ratcliffe‚Äôs move to Monaco, Ineos said: ‚ÄúIneos does not comment on the personal affairs of its owners.‚ÄĚ
It wasn‚Äôt just Ineos‚Äôs corporate tax bill that stayed low after the company‚Äôs move back to London.¬†
Ratcliffe, whose personal fortune is now estimated to top ¬£12 billion, had himself been a tax exile during Ineos‚Äôs years in Rolle. When in 2016 he forfeited that status and returned to the UK it should have been a windfall for HMRC.¬†
But within months of Ineos‚Äôs return from Switzerland, Ratcliffe appears to have set in train plans to move to Monaco, where he could potentially enjoy money from Ineos free of British tax. Sir Philip Green took advantage of apparently similar circumstances in 2005 when he avoided tax on ¬£1.2 billion in BHS dividends by paying them to his wife, a resident of the principality.¬†
News of Ratcliffe‚Äôs move to Monaco first surfaced in late 2018. But we have learned that plans were put in place before then ‚Äď perhaps even before he had been awarded his knighthood.¬†
In the spring of 2017, only months after Ineos‚Äôs Knightsbridge fanfare, Ratcliffe and Andy Currie, Sir Jim‚Äôs fellow Ineos shareholder, anchored off Cap Ferrat on the French Riviera for the Grand Prix that year. Currie told an acquaintance they were also scouting for properties.¬†
Early the following year, an entity called Ineos Monaco Limited was incorporated, with an official filing describing its role as a provider of operational strategy and management for the entire group. It suggested that Ineos was pivoting its corporate structure to funnel management fees up to Ratcliffe and his fellow shareholders in Monaco.¬†
By May 2019, Ratcliffe was still denying the move. ‚ÄúI don‚Äôt live in Monaco‚ÄĚ, he told the Sunday Express.
But in a March 2019 filing to the US Securities and Exchange Commission, Ratcliffe gave his ‚Äúprincipal business address‚ÄĚ as Ineos Monaco‚Äôs office in a residential apartment block called Le Splendido. He listed his home address as an even more exclusive property overlooking the Port Hercule, where his 79-metre yacht Hampshire II has been moored frequently since 2018.¬†
Superyacht moorings in the principality are almost unobtainable for non-residents.
Reece, 63, his finance chief, has the apartment below in the same block. Currie, 65, his operations specialist, is listed as having a property a short stroll uphill from the port.
‚ÄúThere are two places where you can be guaranteed to be telling the truth: one is in court, the other is in an SEC filing,‚ÄĚ a source close to Ineos‚Äôs plans told us.¬†
Around the same time, Ineos subsidiaries had embarked on a series of odd-looking transactions. They began paying each other large extraordinary dividends, passing billions of pounds up the corporate tree towards their ultimate holding company in the Isle of Man owned by Ineos‚Äôs three shareholders ‚Äď Ratcliffe, Currie and Reece.¬†
The one-off dividend payments would potentially allow them to move billions of pounds offshore and save around ¬£850 million in UK tax, our analysis shows. The plan saw ‚Äúdecades of wealth generation leave the UK overnight‚ÄĚ, according to a source with knowledge of Ratcliffe‚Äôs plans.
The Ineos billionaires intend to relocate to Monaco for as long as it takes to shift dividends to the principality and cash in, the source familiar with Ratcliffe‚Äôs plans said (though UK tax law means they may have to stay five years to avoid being taxed on their return).
Even among Ineos‚Äôs advisers, the plans created tension.¬†
In 2019 Ineos asked its auditor, PwC, to state publicly that Ratcliffe was not resident in Monaco, we understand. Having seen the SEC filing, however, the accountancy firm refused, triggering a row that led to its resignation. Ineos and PwC declined to comment on the separation.
Ratcliffe, a wiry 6-foot-4-inch ultra-marathon runner with swept-back silver hair, has built Ineos in his own image.¬†
‚ÄúThey gave everyone a fitness tracker and gave everyone a diet plan,‚ÄĚ one former worker at a company taken over by Ineos in 2015 told us. ‚ÄúThe people who were going to succeed with Jim had to be a bit like him‚ÄĚ.
Being like Jim meant emulating ‚Äúno-nonsense northern businessmen‚ÄĚ who ‚Äúdon‚Äôt suffer fools gladly‚ÄĚ, according to The Alchemists, Ratcliffe‚Äôs life story published shortly before his knighthood. At Ineos, ‚Äúspades are called bloody shovels‚ÄĚ, he says.
Ineos‚Äôs roots go back to 1992 when Ratcliffe, then a 40-year-old employee with a firm of venture capitalists, spotted an opportunity to snap up a chemicals business being sold off by BP. Rather than urging his City bosses to acquire it, he and a group of friends convinced the banks to lend them enough to buy it themselves, listing their new company, Inspec, on the stock exchange.
Ratcliffe, with two young children and a mortgage, put his house on the line. But the business flourished and in 1998 he repeated the trick to create Ineos. In 2005, Ineos swallowed Innovene, another BP chemicals arm, in a $9 billion deal that saw it triple in size overnight.
It was a testament to Ratcliffe‚Äôs negotiating skills and the first in a series of mega-transactions that would by 2018 make him Britain‚Äôs richest man.
‚ÄúYou wouldn‚Äôt have an easy ride. He‚Äôs certainly no pushover,‚ÄĚ Peter Marshall, an investment banker who came up against Ratcliffe in crunch refinancing talks during the financial crisis, told us.¬† ‚ÄúBut he does it in a non-aggressive way. I‚Äôve been in a lot of negotiations on deals where people can be aggressive, they can be loud. You don‚Äôt get any of that with Jim.‚ÄĚ
After a degree in chemical engineering, chosen over mechanical engineering because ‚ÄúI didn‚Äôt want to get my hands dirty‚ÄĚ, Ratcliffe was rejected for a graduate job at a BP chemicals plant because of his eczema. It was a slight he would carry with him: ‚ÄúI did finally get to work for BP Chemicals,‚ÄĚ he later said. ‚ÄúBut only after I bought it‚ÄĚ.¬†
Instead he quickly retrained as an accountant; it was with numbers rather than chemicals that he would forge his career. An accountancy position in pharmaceuticals led to a master‚Äôs degree at the London Business School and then a job in London with a US venture capitalists Advent International, and the investment opening that was the first step to Ineos.
The Ineos way
Today, Ineos‚Äôs strategy still owes more to Mayfair than Manchester. It entails buying unloved companies by taking on heavy bank debt, then boosting their efficiency with tough cost controls. Company cars and credit cards are cancelled, IT bills slashed, expenses monitored. Middle managers are laid off in droves.
‚ÄúIt‚Äôs all about money, and the numbers. Money and generating equity return,‚ÄĚ Ratcliffe writes.
‚ÄúThey run a very, very tight ship,‚ÄĚ the former worker told us, recalling the culture shock when Ineos took over. ‚ÄúWe‚Äôre talking about virtually counting the paper clips.‚ÄĚ For that worker, it quickly became clear that jobs, as well as paper clips, were at stake.
‚ÄúJim came in and chatted to everybody and said, ‚ÄėWe probably won‚Äôt be keeping everybody.‚Äô He was quite upfront about it. ‚ÄėWe‚Äôre gonna give this business three years, see if we like it. If we don‚Äôt like it, we‚Äôll sell it. If we do, we‚Äôll stay in it.‚Äô‚ÄĚ
The laser focus on costs was in marked contrast to Ratcliffe‚Äôs personal style. He would fly entire executive teams to a Botswana safari lodge for a meeting, or take favoured bosses heli-skiing in Sweden on a whim, the former worker said.
Despite his meteoric rise, Ratcliffe long preferred to keep his profile low, earning the nickname Dr No after Ian Fleming‚Äôs reclusive Bond villain. ‚ÄúJim does not like the limelight,‚ÄĚ said one associate interviewed for a 2014 profile. ‚ÄúHe‚Äôs even got the light in his fridge turned off.‚ÄĚ¬†
But the shy tycoon would find himself on the front pages when he became a hate figure for trade unions in one of the UK‚Äôs most bitter industrial disputes, as striking Grangemouth workers distributed ‚Äúwanted‚ÄĚ flyers featuring his face and paraded outside his bankers‚Äô City headquarters with a giant inflatable rat.
‚ÄúThe episode was a humiliating blow,‚ÄĚ he later recalled. And perhaps in response, the once-retiring businessman has in recent years paid closer attention to his image.¬†
In 2018, when Ratcliffe topped the Sunday Times Rich List, officially becoming the UK‚Äôs wealthiest person, it was in controversial circumstances.¬†
He opened his private company‚Äôs books on a one-off basis to give just a brief snapshot of Ineos‚Äôs accounts, leaving some at the newspaper uneasy at what seemed to be a calculated public relations push to coincide with the release of his book just a month before he was knighted.¬†
Since then, Ineos has reverted to type, says Robert Watts, who compiles the Rich List.
‚ÄúThe unusual level of disclosure we saw in 2018 has unfortunately not been repeated,‚ÄĚ he said.
On Sunday, Ratcliffe was one of the first onboard the Ineos Team UK boat to commiserate Sir Ben Ainslee after the British sailor lost to rivals Luna Rossa in the preliminary stage of the America‚Äôs Cup.¬†
But even in defeat, Ratcliffe may ultimately come out on top. It‚Äôs rumoured that Ineos will be the Cup‚Äôs next ‚Äúchallenger of record‚ÄĚ ‚Äď allowing Ratcliffe far greater control over the competition than at present. Ultimately, the consummate negotiator is likely to get his way.¬†
Photographs Getty Images, Feedship.nl, PA