Npower has come up with some responses to this morning's news that it's avoiding tax using a Maltese shell company. On its web site it says:
npower statement on 38 Degrees report (30.04.13)
"This report doesn't add anything new. We've done nothing wrong and HMRC are aware of everything here and they still class us as a low risk company. It's sad to see this continued harrying of a company like ours that has invested billions into the UK.
"The use of Malta made no difference to our UK tax contributions and we've not used this route since last year.
"The number of informed commentators who have defended our tax position in the last two weeks, shows that this criticism is flawed."
These are my responses to that:
1) Yes it does add something new. The suggestion as to the amount of tax lost is undoubtedly new. As is the detail on the Malta link.
2) Sure you've done nothing wrong. We never said you had.
3) Can you please prove the claim made about HMRC?
4) Why does it make no difference to your UK tax contribution? If the share capital invested in Malta had instead been invested here Npower would have paid tax in the UK, so it's just not true that it makes no difference to the UK tax paid.
5) Why do you no longer use the Malta route?
8) How do we know you no longer use Malta?
7) What are you doing instead? Where is money being borrowed from now?
8 ) When will we see accounts to prove this?
9) Can we please have the names of these informed tax commentators?
And then they're trying another tack in the media. Take this from the Channel 4 web site:
A spokesman for RWE npower confirmed it worked with the Malta company "for a couple of years" until 2011, adding: "I can categorically state that this makes no difference to our UK tax situation."
This also needs explanation:
1) What do you mean "worked with". You owned it within RWE. There's no working with in that case - this is a wholly owned arrangement. Can you explain the words used in that case?
2) What does a couple of years mean when it was at least four?
3) How can this mean there was no impact on the UK tax position? Of course it impacted UK tax - relief was claimed for the expense. Can you explain?
4) Is it your excuse that you can't be accused of UK tax avoidance because you were actually avoiding tax in Germany?
Answers would be welcome - and would be published.
UPDATE 14.30
The Npower website has been updated and the following has now been put up to replace the comment noted above:
npower statement on 38 Degrees report (30.04.13)
npower CEO Paul Massara said: "The use of Malta in making payments on our financing made no difference to our UK tax contributions."
"The current campaign against npower is asking us to stop the use of this financing route, something we did last year."
"npower has not, and will not, engage in tax avoidance. Our corporation tax bill was low between 2009 — 2011 because we made losses in our retail business and invested billions into the UK." (ENDS)
1) Please prove this - and how you can say so.
2) Prove it, and why?
3) What was this then? And why did you stop it then?
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I can’t speak for RWE, of course, but a couple of observations:
3) HMRC’s low risk classification would have been determined by the Customer Relationship Manager within HMRC. You need to be pretty much up to date with tax affairs to be “low risk” – a couple of long-standing enquiries, or a thin capitalisation position they don’t like, will move you into “not low risk” (the euphemism for medium-to-high risk).
4) Wherever they borrowed the money from they’d still get a CT deduction, be it Malta, Germany or a UK bank. The only things that would affect the deduction are thin capitalisation or the debt cap, which would have applied equally to loans from Malta. There’s maybe a debate to be had as to whether or not people should capitalise as thinly as possible, but it seems a bit unfair to say that you shouldn’t be allowed to max out your credit limit – that just makes the effective credit limit lower.
Interestingly, you are on record (on this site) saying that a UK company choosing between debt and equity funding is not UK tax avoidance as there are already rules to govern what are acceptable levels of borrowing (and interest payments). Is this is a change of heart or just that it would get in the way of a good story?
If the transactions are with third parties I think that is logical
These are just game play to shift profits
And that’s utterly different
“This report doesn’t add anything new.”
Look the other way this is old hat….
We’ve done nothing wrong and HMRC are aware of everything here and they still class us as a low risk company.”
We’re good guys really and the big firm 4 we use is in on our tax avoiding sorry that’s planning arrangements. Given that HMRC is swamped with Big 4 staff, they would know everything and of course our accounts have been “stapled virtually”, so that any “over zealous old dinosaur” (sorry honest hardworking Inspector Taxes not brainwashed by our Moonie business cult) can’t poke his or her nose into our affairs, sorry that’s check our tax compliance and query our offshore tax avoidance arrangements.
“It’s sad to see this continued harrying of a company like ours that has invested billions into the UK.”
Hark, I hear violins playing a bitter sweet melody in the background. I wonder if that’s “Hearts and Flowers”?
“The use of Malta made no difference to our UK tax contributions”
More weasel words?
It was German tax that we were really avoiding? No wait that doesn’t sound good. Hmm we meant to say that if we hadn’t used Malta, we would have used amnother tax haven to avoid making our UK tax contributions. The fact that in the end, we used Malta makes no difference? hmm this needs some more work.
“The number of informed commentators who have defended our tax position in the last two weeks, shows that this criticism is flawed”
Yes our tax avoidance sorry planning really does work and is legal so ya boo sucks to you!
“A spokesman for RWE npower confirmed it worked with the Malta company “for a couple of years” until 2011, adding:”
Smoke and mirrors?
It was a casual affair really. We never got to know the Malta company in the biblical sense!
“adding: “I can categorically state that this makes no difference to our UK tax situation.””
We would have found another tax haven to use in order to dodge tax.
“The current campaign against npower is asking us to stop the use of this financing route, something we did last year.”
When we saw Google and Starbucks coming under the spotlight, we thought yikes, we better not let our little arrangement in Malta common under public scrutiny especially when we dropped the ball on our complaints procedures not so long ago.
http://www.thetimes.co.uk/tto/business/industries/utilities/article3211411.ece
“npower has not, and will not, engage in tax avoidance.”
Earlier did we imply hat we avoided tax, oh, no, no. We do however carry out “tax planning and tax mitigation” exercises.
“Our corporation tax bill was low between 2009 — 2011 because we made losses in our retail business..”
But we manufactured the losses as part of our tax planning arrangements
“…..invested billions into the UK.”
Look we’re playing the “wealth/job creator” Joker card