British water companies are avoiding millions of pounds in tax by loading themselves up with debt listed on an offshore stock exchange, an investigation has revealed.
The disclosure is likely to reignite the public outcry about legal tax avoidance by big firms at a time when Britain is drowning in debt and suffering painful public spending cuts. It comes only a week after industry regulator Ofwat announced that water bills would rise by an average of 3.5 per cent to £388 a year. Corporate Watch found six UK water companies took high-interest loans from their owners through the Channel Islands stock exchange. Interest payments on the loans reduce taxable profits in the UK and, thanks to a regulatory loophole, go to the owners tax free.
According to the report, Northumbrian, Yorkshire, Anglian, Thames, South Staffs and Sutton and East Surrey water companies all borrowed from subsidiaries of their owners based overseas. Those owners can receive the interest payments tax free by issuing the loans through the Channel Islands stock exchange as "quoted Eurobonds".
When a UK company pays interest to a non-UK company, it usually 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 those on the Channel Islands or Cayman Islands –they benefit from an exemption, so no tax is taken off.
Read more on the website of The Independant