Water companies have come under fire for allegedly using tax havens to route profits.
Investigative journalists Corporate Watch analysed the finances of 19 of the UK’s water and sewerage companies , and found 6 to have exploited a regulatory loophole to avoid tax.
The companies named were Northumbrian Water, Yorkshire Water, Anglian Water, Thames Water, South Staffordshire Water and Sutton and East Surrey. They all took high-interest loans from their owners through the Channel Islands stock exchange, which reduced the profit in the UK and therefore becomes tax-free.
The owners issued the loans through the Channel Islands stock exchange as “quoted Eurobonds”.
When a UK company pays interest to a non-UK company, it has to withhold 20 per cent of the payments and give it to the UK tax authorities. But if the loans are issued as quoted Eurobonds on a “recognised” stock exchange, such as the Channel Islands or the Cayman Islands, they benefit from an exemption that means no withholding tax is taken off.
A total of £3.4 billion was borrowed by the 6 companies using the loophole, with Northumbrian Water named as “the most brazen case, only paying 11% interest on just over £1 billion of loans aken from it’s owner Cheung Kong Group.
The company answered when questioned by Corporate Watch that “it complies stringently with all corporate reporting and regulatory requirements as set out by Ofwat”.