npower, one of the UK’s big six energy suppliers, has been accused of avoiding paying tax by funneling funds to Malta.
The company, which is owned by German utilities giant RWE, is alleged to have avoided paying up to £108 million in UK corporation tax over the last four years by channelling funds to the Maltese company Scaris.
More than half of npower’s funding is said to have come from RWE through loans paid via Scaris, which enables npower to return annual interest on the loans and means it can post a loss and avoid corporation tax.
Comparisons have been made to recent high-profile cases involving Amazon and Starbucks, the latter of which used sister firms to avoid paying tax.
Nothing to hide
Earlier this month, npower chief executive Paul Massara told the Commons Energy and Climate Change Select Committee that his company had not paid corporation tax for three years.
According to Mr Massara, the £5 billion that npower has reinvested into the UK through the construction of new power plants and new jobs qualified it for tax breaks.
“If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule,” he added, though no mention was made of Scaris at the time.
Now, the accusation that profits have been channelled to the company has led to a petition being set up by the political activism group 38 Degrees, which claims npower is being let off the hook while hundreds of thousands of UK consumers struggle to pay their energy bills and slip into fuel poverty.
“Our energy bills are rocketing. In November, you hiked gas and electricity prices for your customers by nearly 10%. And now you’ve admitted that you haven’t paid a single penny in corporation tax for three years,” the group said.
“If you don’t change your ways, your current customers will start to leave you. And the rest of us will encourage them to do so. So please stop tax dodging and pay up.”
Responding to the latest claims, an npower spokesman confirmed that his company had worked with Scaris for “a couple of years”, but insisted that all dealings with the Malta-based company were above board.
“I can categorically state that this makes no difference to our UK tax situation. All of the ways in which we manage our tax is approved by HMRC,” he explained.
“I can confirm that all of our UK activity is taxed in the UK and we pay all the taxes due. The reason it has been modest in the last few years is that we have invested around £5 billion in the UK.”
So far, more than 100,000 people have signed the 38 Degrees petition asking npower to pay corporation tax, but the energy giant – and, crucially, HMRC – is confident that its finances are all in order.
Any efforts to pressure the company to pay the tax may amount to wasted energy.