Question to the HM Treasury:

To ask Her Majesty’s Government what assessment they have made of the extent to which raising of funds by Thames Water with a Cayman Islands registered company to finance the Thames Tideway Tunnel and ongoing expenditure complies with government policies on tax avoidance and the use of offshore havens by UK corporations.

The Government is unable to comment on the tax affairs of individual companies.

The Government has always been clear that companies must pay the right amount of tax on their UK activities. HM Revenue and Customs works to ensure that all taxpayers comply with their obligations under the UK’s tax code and pay the right amount of tax. The UK levies corporation tax on the basis of the profits generated by the economic activity and assets held in the UK, regardless of the location of the company’s legal structure. The Government has taken action – both internationally and domestically – to align the taxation of profits with economic activity.

In line with this objective, the Government confirmed at Autumn Statement 2016 that the UK will proceed with a measure to cap the amount of tax relief that large businesses can claim for their interest expense at 30% of UK earnings, effective from 1 April 2017. The new corporate interest restriction rules are consistent with the internationally agreed OECD recommendations from the Base Erosion and Profit Shifting (BEPS) Project. The rules will include provisions to protect investment in infrastructure that have a public benefit and do not give rise to a BEPS risk.