Water giant paid no tax on £1.8bn

Thames Water made £549m in underlying pre-tax profits as it hiked bills by an inflation-busting 6.7 per cent, while customer satisfaction dipped and hundreds saw their homes flooded by sewage.

The figures come in the wake of criticism by Jonson Cox, chairman of regulator Ofwat, that the high profits and tax-reducing corporate structures of some water companies were “morally questionable”.

Thames Water’s profit for the year to the end of March was a nine per cent fall on last year, blamed on the freezing weather and rising levels of bad debt during the economic downturn.

But chief executive Martin Baggs still received a pay rise to £450,000 plus a £274,000 bonus. Next month he is in line to collect a further £366,000 as part of a long-term incentive plan.

Thames Water is owned by Kemble Water Holdings, whose main investors are ultimately controlled by the Australian-based Macquarie Group.

Thames says its taxable profits are reduced by allowances on its £1bn-a-year investment programme. Remaining gains are offset by tax losses claimed from other members of the group.

It also said the combined bill for business rates and employee income tax and national insurance and other taxes was £150m.