(6 December 2021) A new report published by CICTAR (Centre for International Corporate Tax Accountability and Research) in conjunction with Panorama has revealed the details of how the UK’s largest care home operator has been funnelling profits offshore through the Caymen Islands while reporting artificial losses. The report found that the owners of operator HC-One siphoned millions in tax-free profits to the Cayman Islands during the pandemic, while receiving an additional £18.9m in government payments for COVID-19 costs.
The report describes how HC-One created a pattern of artificial losses to access the funding, mainly through dividends, lease payments and high interest payments on related party debt to offshore owners - all the while reporting fabricated losses. These purported losses have bolstered HC-One’s calls for increased public funding, higher fees, and lower wages for the predominantly female front-line workers.
Public funding and private fees that could have been invested in front-line staffing and care have instead continued to line the pockets of the world’s wealthiest global investors. The findings support a recent EPSU report which questioned the ethics of profit-making from care during a global pandemic. The report recommends reforming public procurement so that contracts are not awarded to companies which avoid paying taxes; investigating public financing of long-term care; and bringing care companies under public ownership when they fail.
As the care sector recovers from the impact of the COVID-19 pandemic, the need for investment has never been clearer – but this investment must come with transparency and accountability. While the public expects the UK’s forthcoming ‘health and social care levy’ to bolster the care sector, the report makes clear the very real risk that any additional funding could find itself in the pocket of foreign investors rather than improving the sector.
Jason Ward, Principal Analyst, CICTAR and author of the report said: “The practices of the private equity owners of HC-One – and other UK care home operators – demonstrate that the extraction of profit, for wealthy offshore investors, is prioritised above care for elderly and vulnerable residents. The UK government and local authorities must urgently increase transparency and improve oversight and regulation in this critical sector. Major reforms have been long overdue and can’t be pushed down the road any longer.”
Jan Willem Goudriaan, General Secretary, EPSU added: "With a growing private care sector in Europe, the findings are of concern. We expect the European Care Strategy to be unequivocal in its commitment to workers and to those needing long term care like the elderly, people with disabilities and others. We do not need policies that protect profits of a handful of multinational companies. We cannot tolerate tax avoidance and the lack of collective agreements while companies receive millions in public money through public contracts."