Thames Water defers tax liability
The UK's biggest water company does not expect to pay any more corporation tax for up to a decade, it said today, as an above-inflation rise in bills saw its profits rise by nearly a fifth.
Thames Water says its infrastructure investments of £1 billion a year over the next seven to ten years mean it will be able to defer £20 million a year in tax liabilities.
The firm, which is at loggerheads with regulator Ofwat over customer charges, has already built up a deferred tax bill of £855.6 million and its latest plans will see this rise to more than £1 billion.
Finance director Stuart Siddall said: "We are saying today that we'll continue to invest around £1 billion a year."
He said tax savings as a result of this meant that bills were on average £7 a year less than they would otherwise be.
Thames Water will set out plans for the five years from 2015 on Monday, as it submits plans for customer charges over the period to Ofwat.
Today it announced a 19.2% surge in pre-tax profits to £134.2 million for the six months to the end of September, on turnover up 8.2% to £976.5 million - helped by a 5.5% average bill rise and increased usage during the heatwave.
The water and sewerage firm, which serves 14 million customers in and around London, earlier this month had an application to add £29 to customers' bills for next year because of unforeseen costs rejected by Ofwat.
Announcing interim results today, it said it was "reviewing next steps" and had until early January to decide whether to accept the ruling or ask for it to be referred to the Competition Commission.
Meanwhile it disclosed that it has set aside £14.1 million to cover a potential fine over Ofwat allegations of misreporting of sewer flood outputs. Thames Water said it intended to contest the claim "vigorously".
Water companies are under pressure from the regulator to consider scaling back price increases amid a squeeze on household finances.
They must submit proposals for the 2015-2020 period by Monday. United Utilities has already said it is proposing price rises below inflation.
Thames Water has not yet disclosed details of its submission, but in today's results announcement chief executive Martin Baggs defended its pricing, saying its average bill was the second lowest in the industry.
Mr Baggs said: "We provide our customers with the essential service at the heart of daily life, health and enjoyment; in order to maintain this essential service we need access to funding to pay for efficient investment in our networks and other assets."
Thames Water is owned by Kemble Water Holdings, whose investors include Australian investment firm Macquarie Group.
It sparked anger earlier this year with the disclosure that it paid no corporation tax in the last financial year.
The company said today that its £1 billion a year investments from 2010 to 2015 mean that it has "not paid substantial amounts of corporation tax in recent years".