NPowers £100m tax dodge

The energy giant insisted today it had "done nothing wrong" after activists with 38 Degrees and the Tax Justice Network uncovered an elaborate web of inter-company loans funnelled through a company registered in Malta.  Chief executive Paul Massara admitted to MPs earlier this month that NPower had paid no corporation tax since 2008, but he insisted that new capital investments had simply wiped out its profits.

 

"If we had not made that investment we would not have the deductibility that we would be allowed. That is a simple accounting UK rule," he said.

 

However tax expert Richard Murphy said NPower's accounts suggested it had funnelled cash back to its parent company RWE through a shell company registered in Malta. Records showed that NPower took out more than £2.7 billion in loans from its German parent company RWE, but £2.3bn arrived via RWE's Maltese subsidiary, Scaris Ltd. NPower's profits were then forwarded as interest on Scaris's loans, allowing Scaris to pay back RWE and incurring as little as 5 per cent in dividends tax under Maltese law compared with Britain's then corporation tax rate of 26 per cent.

 

Mr Murphy said it was "very hard to explain why RWE would lend money to NPower via Malta unless tax avoidance was its motive.  Maybe £100m" in UK tax revenues had been avoided as a result, he said.

 

The £100m tax gap equates to around 71 per cent of NPower's total contribution to the government's underfunded Warm Homes Discount scheme, which provides a £135 discount on winter fuel bills for poor households.

 

NPower pledged £140m over four years to the scheme in 2011, as it wound up its Maltese wheeze.  But as Save the Children's Justin Forsyth told the Morning Star last January, the scheme's "huge" funding shortfall meant only 3 per cent of Britain's 800,000 eligible households were protected.

 

The "fundamentally flawed" scheme relied on company contributions, he said, with the fund needing millions more than the industry had been willing to pay.

 

Yet NPower's press office was unrepentant.

 

"We've done nothing wrong and HMRC are aware of everything here and still class us as a low-risk company," it said in a statement, adding that its inter-company loans were "standard business practice."

 

It said: "This is not only perfectly legal - and something HMRC is fully aware of - it is common practice," it said.

 

But Fuel Poverty Action's Sam Robertson was outraged.

 

"This money could have paid for about one-third of the Warm Front free insulation scheme recently scrapped by the government."