Several Energy Firms Using Law Loophole on Tax Bills

Cutting tax bills is the work of most accountants and a great budgeting skill for businesses, but exploiting a legal loophole to cut tax bills is improper and irresponsible. According to a research by a local newspaper, 30 UK energy companies have exploited a particular legal loophole to cut bills.

According to The Independent and watchdog Corporate Watch, the 30 UK energy firms have made use of a “quoted Eurobond exemption” which allowed them to accept high interest loans using the Channel Islands Stock Exchange, which proves to be very controversial.

The Independent said that the company racked up huge interest payments to their parent companies, reduced the bottom line of these payments and cut their tax bills. The interest payments were international, allowing them to issue it through the Channel Islands and exit the United Kingdom tax free.

This allows them to avoid the 20% withholding tax. Many companies, including a gas company had avoided £72.5m in taxes. Other firms saved tens of millions of pounds, according to the newspaper.

According to Opposition Leader Ed Miliband, the govenrment’s failure to take down loopholes in the legal sector is costing the UK citizens more than they could chew. Miliband said that he was working with the OECD to address the problems and will consider changing the rules on the treatment of cross-border transactions.