Britain’s biggest water company sees revenue rise to £1.8bn but still pays no UK corporation tax.

Thames Water paid no Corporation Tax – during a year in which revenues rose to £1.8bn.

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

 

Thames Water's profit for the year to the end of March was a 9% 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.

 

Macquarie has long sought an investment strategy where monopolies are held – unlike gas and electricity providers, competition is limited for UK households for water.

 

Thames Water told Sky News in a statement: "We have not paid much corporation tax in recent years because the Government’s tax system allows us to delay, not avoid, payment of tax based on how much we invest.

 

"Because we are investing £1bn a year from 2010 to 2015, more than any water firm in the UK's history, we are able to defer a lot of tax payments to future years."

 

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

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It also said the combined bill for business rates and employee income tax and national insurance and other taxes was £150m, while spending with suppliers and contractors boosted the wider economy.

 

Mr Cox questioned the use by some water companies of structures to reduce their tax liabilities.

 

Thames Water said dividends for the year have been cut from £280m to £231m and there was no payout to shareholders of Kemble for the second part of the year.

 

Much of Thames Water's income was spent on servicing huge debts, with interest payments of over £400m over the year as borrowings increased from £7.8bn to £8.4bn.

 

Revenues at the utility giant, which serves 14 million customers, rose 5.7% from £1.7bn to £1.8bn. It reflected a 6.7% rise in regulated bills,though metered consumption was £9.5m lower.

 

In the current financial year, customers will face another inflation busting rise, of 5.5%. The company said this was needed for investment in infrastructure and services.

 

However, Thames admitted its performance was not good enough, as Ofwat surveys showed customer satisfaction dipped over the year.

 

It blamed the introduction of a new IT system together with the impact of heavy rainfall.

 

During the year, nine million customers in London and the Thames Valley faced water restrictions, while repeat sewer flooding incidents increased from 355 to 549, again blamed on the weather.

 

Mr Baggs said: "We recognise, however, that regardless of these exceptional circumstances, we have not always provided the best service to our customers."

 

Thames Water saw leakage of 646 million litres a day, up from 637 million litres, blamed on the colder weather, though it met targets on repairs and replacement of old pipes.

 

Mr Baggs said: "Over the past financial year exceptional weather conditions have presented tough challenges for the business.

 

"The period began with a drought, following the driest two-year period on record, and ended with widespread flooding after becoming England's rainiest 12 months on record.

 

 

"Despite these challenges we have for the third year running carried out a further £1bn of improvements to our networks, while the average household bill in our region is the second-lowest in the country."