FRENCH energy giant EDF has revealed it paid £116 million in corporation tax last year after an MP criticised the firm along with several other multi-national utilities in the UK for avoidance.
Charlie Elphicke, a tax lawyer and Tory backbencher, last week claimed that water, electricity and gas companies have denied the Treasury up to £1 billion through aggressive forms of tax avoidance.
He singled out a number of water companies, including Southern Water and Yorkshire Water, claiming they had abused the interest deduction system in order to evade paying hundreds of millions in taxes to HMRC. But he accused EDF and German-owned RWE npower for paying “no tax ... whatsoever”.
EDF, which operates the UK’s eight nuclear power stations, hit back as it issued a statement which says it paid “all corporation tax due to HM Treasury”. The company added that it invested £1.3bn in its UK business last year, as well as paying over £50m in business rates.
Their newly revealed tax payout compares to £10.5bn in revenues it made on a statutory basis during 2012, as well as £972m in earnings before interest and taxes (ebit), although this would put their corporation tax contribution below the 24 per cent corporation tax rate charged in 2012.
EDF said: “In response to a recent claim that it pays no tax, EDF Energy wishes to make clear that it pays all corporation tax due to HM Treasury, and paid £156m for 2011 and £116m for 2012.
“This is in addition to investments of £1.1bn in 2011 and £1.3bn in 2012 made to the company’s existing nuclear and coal stations, new generation capacity, gas storage and in its customer supply business. These investments benefit businesses and consumers across the UK.
“In addition, EDF Energy pays business rates in excess of £50m every year. EDF Energy is proud of its record of providing a significant contribution to the UK economy.”
The criticism of the firm comes at an important time for energy policy in the UK. It is thought the government is close to clinching a deal with EDF to build the first new nuclear power station in decades at Hinkley Point in Somerset after announcing £10bn in financial guarantees to the nuclear power industry last week. At the same time energy regulator Ofgem highlighted uncertainty around supply and demand for energy in its latest electricity capacity assessment, which gave rise to fears that Britain could be hit by 1970s-style industrial blackouts unless investment is increased.
Elphicke said that nine different utility companies had collectively made sales of £28bn, generating operating profits of £10bn, on which they had only paid £541m in tax during a debate on multinational companies and corporation tax.
He claimed that EDF and RWE npower have a “collective turnover of £25.6bn, operating profits of £1.7bn and yet no tax paid whatsoever. And it can’t all be explained by capital allowances”.
He estimated that EDF has made £268.4m of interest payments to group companies in the last three years, with a potential tax loss of £70m.
The MP said he wanted “a system where tax avoiding water companies and tax avoiding utility companies are made to give a rebate to hard-pressed customers who have been facing increased bills in recent years”.
Treasury minister David Gauke said HMRC secured £8bn of additional revenues from large companies through tax compliance work in 2012-13 and more than £23bn over three years.
He said: “HMRC does have robust methods in place to ensure that tax compliance by the biggest businesses occurs and the numbers support that.”