Energy companies have allegedly cut tens of millions of pounds off their tax bills by exploiting a legal loophole, according to a joint investigation by the Independent on Sunday and non-profit group Corporate Watch.
UK Power Networks, Electricity North West and Scotia Gas Networks are all accused of taking advantage of the “quoted Eurobond exemption” to lower their taxes.
The report claims Scotia Gas Networks has saved £72.5 million, UK Power Networks has saved £38 million and Electricity North West has saved £30 million.
Under the scheme, the companies allegedly slashed their taxable profits, by piling up debts to their foreign shareholders.
A 20% ‘withholding tax’ automatically charged by HMRC on interest payments sent abroad, means such a scheme wouldn’t normally be particularly profitable.
However, the companies and their shareholders are accused of exploiting the ‘Eurobond exemption’, which allows foreign interest payments to go untaxed if loans were made through an offshore stock exchange. The report alleges the Big Six supplier SSE is also complicit in the scheme, having signed off on loans made to Scotia Gas Networks. SSE owns half of the firm.
Speaking on The Andrew Marr Show, the Liberal Democrat Chief Secretary to the Treasury Danny Alexander said: “My message to any company that is engaged in aggressive tax avoidance is to stop it.