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Business News

British Gas owner Centrica criticises tax regime as it announces residential profits of £356m

Residential arm sees 3.2% rise after raising tariffs in December

The boss of British Gas-owner Centrica today criticised the Government’s tax regime that sees it pay a rate of 47% while rival foreign suppliers avoid corporation tax entirely.

Centrica’s tax bill hit £690 million in the first six months of this year, lifting its tax rate from 43% in 2012.

It comes in the wake of German-owned Npower being dubbed “the new Starbucks” by MPs earlier this year after admitting it had not paid corporation tax for three years.

Npower said it was “in no way tax avoidance”, adding that it was because “we’ve been investing hundreds of millions to keep the UK’s lights on.” Sam Laidlaw, chief executive of Centrica, said: “Our basic British Gas business pays full corporation tax. There’s nothing clever about our tax arrangements. It’s important for us to contribute and to pay our full share of tax.

“I can’t speak for what [rivals] do. But it’s a question of how the rules are written. Clearly the Government is very focused on international consensus on this, and I don’t think it’s going to be easy – different countries will compete for investment based on tax regimes they have in place – but [a fairer corporation tax regime] would certainly put us in stronger competitive position.”

A portion of Centrica’s tax bill comes from the energy giant’s North Sea gas operation, which rivals like Npower do not have. However, Laidlaw’s  comments follow a warning from a cross-party group of peers that the UK’s corporate tax system “is not working and urgently needs reform”.  Lord MacGregor, chairman of the House of Lords committee on economic affairs said: “There is a sense that corporation tax is voluntary for some multinationals that operate globally, while small UK-based businesses go by the book and have to pay.”

In the first half of this year, Centrica still made an adjusted operating profit of £1.58 billion, up 9% thanks to Britain’s long and cold winter and higher returns from its gas production and storage business.

Profits at the domestic arm British Gas rose 3% to £356 million in the first half after the supplier boosted earnings from the bitterly cold weather by raising tariffs by 6% in November. Yet Laidlaw hinted of further price hikes when he said: “There are some cost pressures in the business.”

Critics attacked the energy giant for refusing to freeze prices this year. Mike O’Connor, chief executive at Consumer Futures, said: “Wholesale gas prices have not risen significantly and their gas production and much of their generation business has done well.”