Exclusive: Yorkshire Water bosses to face MPs’ grilling over tax

Julian Smith, the Conservative MP for Skipton and Ripon, described the group’s position as “gobsmacking”, and vowed to raise the issue with the industry regulator Ofwat and the Treasury.

Yorkshire Water, which increased the average water bill by 6.6 per cent last year, paid out dividends of £256m to its shareholders and claimed a tax credit of £62.3m in the year ending March 2013.

The water industry is under increasing pressure to pay more tax after it emerged in June that nine private water firms, including Yorkshire Water, had avoided more than £1bn in tax since the election.

Mr Smith said he called the September 3 meeting to hear Bradford-based Yorkshire Water explain how it has been able to make large profits without paying corporation tax.

He has invited all 54 Yorkshire MPs as well as Charlie Elphicke, a tax lawyer turned Tory MP who has singled out the utility for criticism in the House of Commons.

Mr Smith said he would seek a meeting with Ofwat, the regulator, to discuss the situation after the meeting with Yorkshire Water. He also plans to raise the issue with the Treasury.

He added: “We need people to be contributing at the level that is set by the Government of the day in the particular countries that they are operating in.

“I want to understand how that’s not been the case with Yorkshire Water.

“They are not doing anything illegal but I don’t think that position is sustainable.”

According to the company’s annual accounts for the year to the end of March, Yorkshire Water quadrupled its dividend payment to shareholders from £62.3m in 2012 to £256m this year.

Meanwhile, total emoluments last year reached £4.21m for the 13 executive and non-executive directors.

Mr Smith added: “I think it’s very difficult for people to understand as they pay what are high bills for their utilities that corporation tax is not being paid by these companies that are providing them.”

In June, Mr Elphicke singled out Yorkshire Water as an “especially egregious” example of companies abusing the interest deduction system.

Yorkshire Water clarified its corporate structure in its annual report. The group established three companies in the Cayman Islands as part of its “whole business securitisation” (WBS) in 2009, which it said are resident for tax in the UK.

It said the WBS enhances its creditworthiness, allows it to borrow more money at lower rates and helps it pay less corporation tax, which it claims ultimately benefits customers.

Referring to the £62.2m tax credit, the annual report said: “This does not ... represent either repayments of corporation tax by HM Revenue and Customs or reductions in amounts of corporation tax owed to HM Revenue and Customs and is exclusively as a result of a change in an accounting estimate.”

A spokeswoman from Yorkshire Water said: “As a wholly UK tax resident company, we pay our tax in full and in total compliance with the rules of Her Majesty’s Revenue and Customs (HMRC).

“Our annual report includes an explanation of why the business is structured the way it is, how it is financed and how the Government calculates how much corporation tax we have to pay.

“We have always been nothing less than completely open and honest around our accounts and we are committed to delivering more for less for our customers, keeping prices as low as possible.”