IBM 'paid Revenue ?700m over tax evasion

IBM paid the Inland Revenue an estimated £700 million to settle claims of tax evasion in 2001, says a disaffected former employee of the US computer giant.

If the allegation is true, the payment would almost certainly be the largest of its kind in Revenue history. IBM declined to confirm or deny the claim yesterday, calling it 'rumour and speculation'.

The claim is contained in a submission made this month by Gerard Churchhouse, a former IBM marketing manager, to the House of Commons Public Accounts Committee, which is examining the Revenue's fight against tax fraud.

IBM confirmed in 1999 that it was being investigated by the Revenue for suspected evasion, following a complaint by Churchhouse. But neither IBM nor the Revenue, which never comments publicly on its tax probes, has disclosed the outcome of the investigation.

In 1999 Churchhouse claimed that IBM UK had transferred artificially high royalties to its loss-making American parent in the early Nineties, in an attempt to reduce the group's global tax bill. He said that this alleged 'transfer pricing' allowed the company to evade up to £330m in UK taxes.

In his new submission to the committee, however, Churchhouse has revised his estimate upwards. Based on what he says he knows about IBM's financial affairs and the Revenue investigation, and citing published Revenue statistics, he claims that 'the IBM recovery, as best as I can tell, was of the order of £700m'.

Churchhouse, who says he was sacked for raising his concerns with company bosses, settled an industrial tribunal claim against IBM in 1995. A separate legal action against the company was dismissed in 1999. He has told the MPs' committee that the Revenue owes him a 'whistle-blower's' reward.

An IBM spokesman said: 'It was reported and confirmed by IBM in 1999 that there was an [Inland Revenue] audit. I cannot confirm the outcome. The figures bandied around in 1999 were Mr Churchhouse's allegations. We decline to comment on those figures as well as the figures currently being proposed by Mr Churchhouse.'