The Guardian's climbdown resolves the libel and malicious falsehood action Tesco began in April over allegations made by the newspaper about its tax affairs in February.
The apology, , accepts that the allegations -- that Tesco had created an elaborate off-shore corporate structure to avoid paying up to £1bn in UK corporation tax profits and had already successfully avoided corporation tax on the £500m profit it made from its first two property sales -- were "unfounded".
It also dilutes The Guardian's contention in May that Tesco had avoided paying a smaller sum in stamp duty land tax. The paper now accepts "the use of Cayman Islands companies in the scheme was for legitimate stamp duty savings purposes".
A Tesco spokeswoman said the company was pleased that the matter was resolved, but refused to comment further.
The case has been embarrassing for The Guardian, not least because it emerged its own parent company Guardian Media Group had also used the strategy of setting up an off-shore company to make its acquisition of Emap with joint venture partner Apax tax-efficient.
The friction between Tesco and GMG led to GMG chief executive from her non-executive director position at the supermarket group in April because of the conflict of interest.
The full text of the Guardian's apology follows below:
Tesco -- an apology
Tesco has accepted a formal offer of apology by the Guardian in relation to the reports "Tesco's £1bn tax avoiding plan -- move to the Cayman Islands" and "Every little bit helps: tax free pot of gold at end of Tesco's rainbow" (pages 1 and 27, February 27) and a related editorial and podcast.
In these articles we reported that Tesco had created an elaborate off-shore corporate structure to avoid paying up to £1bn in UK corporation tax on profits from the sale of its UK properties, and that it had already successfully avoided corporation tax on the £500m profit it made from its first two property sales.
We also suggested that this corporation tax avoidance was hypocritical, having regard to Tesco's public stance on social responsibility, and that Tesco's response to the charge had been evasive.
We now accept that these damaging allegations were unfounded and should not have been published. All profits generated by this sale and leaseback arrangement were earned by UK tax-resident companies and have been or will be included in Tesco's UK tax returns.
The use of Cayman Island companies in the scheme was for legitimate stamp duty savings purposes. We also accept that Tesco's responses to the charges were truthful.
We regret that we did not publish the letter from Tesco's tax adviser received on the day of publication of the original articles and accept that the correction published on May 3 was insufficient.
We accept that Tesco was not hypocritical in its corporation tax planning of these transactions having regard to its public stance on social responsibility and has a legitimate interest in seeing the facts about its tax arrangements fairly and accurately reported.
Furthermore, we accept that Tesco is a very significant taxpayer, having contributed over £1bn to the public purse for the year to February 2007.
We are happy to put the record straight and apologise to Tesco. We have also agreed to pay a sum by way of damages to a charity of Tesco's choice and a payment by way of costs.
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