Treasury stops energy firms claiming £900m via loophole

GEORGE Osborne last night closed a tax loophole which was being abused by energy distribution firms, which the government claimed could have cost the exchequer as much as £900m.

The disputed claims relate to the cost of connecting new or refurbished premises to energy distribution networks. Businesses usually carry most of the cost of having their premises connected to such networks – but it is alleged that energy distributors were attempting to claim back allowances dating back decades for the full amount.

This is despite the fact that many of the individual businesses have already claimed back tax for the cost of connecting to the networks.

Gas and electricity suppliers have already attempted to take advantage of loosely phrased tax legislation by submitting £50m of historic capital allowance claims since January, according to the chancellor.

New legislation, which will come into effect immediately, will make it clear to energy companies that this is not acceptable.

“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,” said Osborne.

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

It is thought that the companies – which are regional infrastructure businesses and not household names – only started their bid for the substantial rebates in recent months.

HM Revenue & Customs has pledged to fight against any such claims which have already been made.