Yorkshire Water has defended its decision to not pay corporation tax this year. The company says it does not have to pay the taxes because it spends millions of pounds on bathing water, keeping customer bills down and improving services.
The company, which is based out of Bradford in the North East, says it will be paying out £111.5 million in other taxes though such as employee taxes, business rates and VAT.
Yorkshire Water say that customer bills are kept as low as they can possibly be because it does not ask customers to pay up front. Instead, it has borrowed money for capital investment. It claims it is in full compliance with United Kingdom law because interest costs on borrowings to invest in infrastructure and water improvement are tax deductible.
It was criticised by many Members of Parliament last year for avoiding to pay corporation tax. The Conservative MP for Skipton and Ripon, Julian Smith, said the company had been acting “malevolently” over its tax affairs even though they aren’t strictly illegal.
Mr. Smith said:
It does come down to the corporate behaviour of individual firms. The rules that allow Yorkshire Water to do some of the things they are doing are quite legitimate and they’re useful to many companies. But, if they are taken to the extent that Yorkshire Water is doing, if they are used in a malevolent way, then the taxpayer loses out.
Yorkshire Water is refusing to pay corporations tax despite making a pre-tax profit of £142.2 million between March 2013 and 2014. Its profits were, however, down from last year’s £186 million. Yorkshire Water did see an increase in its annual turnover though which rose by 5% to £984.2 million. The act of avoiding tax appears sketchy at best wherever in the world you may be. New Yorkers certainly don’t have an excuse because there are some impressive tax services in New York.
The way that the corporate structure is assembled, Yorkshire Water can offset tax losses from other parts of its parent company, Kelda Group.
Yorkshire Water attempted to appease critics by cutting the pay packages for the company’s directors. They fell from £4.21 million last year to £3.18 million in a reduction of 25 per cent. However, many people still considered this to be far too much. The number of executive directors at the company were also reduced from nine to six.
The company services areas including West Yorkshire, South Yorkshire, the East Riding of Yorkshire and most of North Yorkshire. They also provide to part of Derbyshire. It was founded in 1973 with origins in the Yorkshire Water Authority.