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Tui Travel admits it did not pay any corporation tax

media captionTUI Travel chief executive Peter Long: "We are seeing a very strong demand for package holidays"

Tui Travel has admitted that it did not pay any corporation tax in the year to 30 September, despite reporting a profit of £390m for the 12 months.

Its chief executive Peter Long said Tui, which owns Thomson and First Choice holidays, had offset earlier losses against this year's profits.

The admission came after Tui reported that its annual profits had risen by 8%, led by an "outstanding performance" by its UK business.

Its annual revenues fell 2% to £14.5bn.

Mr Long said: "We do pay our fair share and we obviously comply with all the laws of the lands within which we operate. So this is just a normal situation.

"It is not clever tax planning, it's the fact that we've had a major integration of two businesses in the UK over the last two years."

A Tui spokesman added: "We have no profits chargeable to UK corporation tax because they are all eliminated due to capital allowances, losses brought forward from prior years as a result of restructuring, and cost incurred as a result of the ash cloud in 2010.

"This offsets our UK taxable profits in full and is fully compliant with UK tax law, perfectly legitimate and normal practice. We expect to pay small amounts of UK corporation tax in 2013/14 with significantly larger amounts in later years as our brought forward losses are eliminated."

Despite a 1% fall in British and Irish travellers, UK-based Tui said profits from its home markets rose 32% during the 12 months.

It said this was down to increased sales of its more expensive package holidays.

The strong performance at its UK business helped to offset a 5% fall in French bookings, while in Spain and Italy they were down 10%.

However, the firm saw gains elsewhere in Europe. In the year to 30 September, Tui saw the number of people booking its holidays rise by 42% in Switzerland, 33% in Poland and 7% in the Netherlands. Across the Nordic countries - Finland, Denmark, Sweden and Norway - they increased by 5%.

Looking ahead, Tui said its winter sales were up strongly, with the exception of France, where it has cut back on capacity.

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