Thames Water is reviewing its business structure after controversy over its use of offshore subsidiary companies to reduce its tax burden, according to the Guardian.
The water company has appointed Ian Marchant, formerly of SSE, as chairman with a mission to close its Cayman Islands subsidiary companies. Thames Water has not paid corporation tax in the UK for the last 10 years, but the company maintains that the offshore companies do not provide any tax benefits. Instead, it is claimed the Cayman subsidiaries are used to raise funds through bonds for an infrastructure investment programme.
Thames Water is formed from a structure of nine companies. The firm says subsidiaries “have always been fully registered in the UK for tax purposes but no longer serve their original purpose of enabling smoother access to global bond markets.”
The company says it has not been liable to pay corporation tax for the last decade due to deferments associated with its capital investment in schemes such as a £4.2bn sewer which travels for 15 miles beneath the Thames.
Nonetheless, the company has admitted that its offshore structure “just looks wrong”. Critics have pointed out that the company has paid £1.2bn in dividends in the last decade. Thames Water also faced a £20.3m fine in March 2017 for large-scale leaks of sewage into the Thames and nearby land.
Following privatisation in 1989, Thames Water was sold to a consortium led by Macquarie, an Australian investment bank. The bank sold its final holding in the company in 2017, leaving the company with £10.75bn in debt financing. The biggest shareholder of the company is now Omers, a Canadian pension fund.