Utility companies accused of attempting to claw back £900m worth of unjustified tax rebates as part of accountancy scam

After recent tax fiascos involving Starbucks, Amazon and Google, the Chancellor has acted quickly to block any funds draining from the Treasury

Britain's biggest utility companies have been accused by the Government of attempting to claw back £900 million worth of unjustified tax rebates as part of an accountancy scam, after new legislation was announced to outlaw so-called “double-claiming.”

Since January this year gas and electricity distribution companies have lodged claims worth over £50m using complex tax rules which they say entitles them to money back from the Treasury for work they carried out for their customers.

After the recent tax fiascos involving Starbucks, Amazon and Google, the Chancellor George Osborne, has acted quickly to block any funds draining from the Treasury.

By introducing fast-tracked legislation, that comes into effect immediately, utility companies will not be allowed to make back-dated claims for costs that have already been paid by business customers.

The potential loss to the Treasury centred on work done by the utility companies to install energy supplies to new or redeveloped properties or businesses,

Businesses customers paid for the energy supply work and then claimed tax relief back. Energy companies were traditionally not allowed to claim again for the same work.

However the practice appears to have been recently reviewed by tax advisers to the big utility companies, insisting the rules have changed and that they were entitled to make new claims for past expenditure.

If this had gone unchallenged by the Treasury the utility companies would have been looking at a large windfall tax repayments and large-scale tax reductions.

Last night in a robust challenge to the utility companies attempted raid on the exchequer, Mr Osborne said “It is completely unacceptable that utility companies think they can claim for huge amounts of money, that business customers have already recovered the cost for. By legislating today, we will prevent utility companies from making these claims.”

The back-dated claims by the energy distribution companies could have lost the Treasury £900m. The new legislation was described as putting “beyond doubt” that the claims could not be made.

Mr Osborne added “The government is committed to competitive taxes to support growth in the UK, But it is only right that companies pay the tax they owe.”

Although tax laws and rules are notoriously complex, the Chancellor offered a quick summary of end to the potential scam on Twitter. He wrote “Some utilities are double-claiming. Charging small businesses & claiming tax back. Am changing law to stop that.”