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Inland Revenue probes IBM for tax avoidance

Ex-employee sparks allegations that funds were shipped to US to dodge UK tax

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IBM UK has confirmed it is in talks with the Inland Revenue concerning allegations of tax evasion. Big Blue issued a short statement today following a story in the Wall Street Journal (WSJ) which alleges that IBM could owe government coffers more than £300 million in unpaid taxes. The allegations centre on whistle-blowing ex-employee Gerard M Churchhouse who was sacked by IBM in 1995. It is not known why the sales and marketing manager was dismissed. However, it seems in return for being booted out he squealed to the Inland Revenue alleging that IBM UK had upped its royalty fees to the IBM Corporation. Instead of paying eight per cent of its income derived from the sale of products and services to IBM Corp, IBM UK increased the payments to 12 per cent. The net result, Churchhouse alleged, was that IBM UK paid less tax in the UK -- because its income was effectively cut -- at a time when IBM Corp was paying little or no tax in the US due to its poor performance. The alleged tax dodging was said to have taken place between 1991 and 1996. Reading from a prepared statement, an IBM representative said: "IBM is currently working with the Inland Revenue on an enquiry. "This is a normal and routine procedure and IBM is co-operating fully. "IBM has no comment to make about Mr Churchhouse or his allegations." The WSJ claims that IBM UK has been under investigation for the last two years. But a spokeswoman for the Inland Revenue said she was unable to comment one way or other on the case. ®

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