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The UK’s three largest water companies have amassed a total tax rebate of £144 million in a one-off refund from HMRC.
Thames Water, Severn Trent and United Utilities all benefited from the industry-wide agreement with HMRC last October.
It relates to revised capital expenditure tax treatment as a consequence of the abolition of industrial buildings allowances (IBA) in 2008.
HMRC said it would not comment on the “tax affairs of individual customers”.
However, the overall refund figure for the industry is likely to be significantly higher with a number of the other water and sewerage companies across the UK, yet to calculate their refunds.
IBAs were introduced by the Income Tax Act in 1945 to encourage a reconstruction by productive industry following the Second World War.
According to HMRC, some expenditure which was covered by IBA is also covered by plant and machinery allowances and after the withdrawal of IBA, companies have been able to claim plant and machinery allowances for types of expenditure previously applicable through IBAs.
United Utilities (UU) benefited the most, having announced in its half year results in November a cash pay-out of £90 million, £75 million of which it said would be passed on to customers.
Although regulator Ofwat had allowed the company to increase 2014/15 prices for customers by an average of 1.2per cent over inflation, UU said it would use £20 million of the tax refund to offset this factor.
UU will use £38 million of the fund for “future sharing with customers” and the remaining £17 million will provide support for customers struggling to pay their bills.
Shareholders will receive £15 million.
Thames Water has committed “100 per cent” of its £10 million refund to its Customer Assistance Fund, doubling the funds available for its scheme, which helps customers who cannot pay their bills.
Severn Trent is set to benefit from a £44 million “exceptional current tax credit” but said it has not yet decided how it will use the extra income.
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