Misunderstanding on tax avoidance
Apparently, MPs on the Commons energy select committee criticised RWE npower after it emerged that the company’s tax liability had been eliminated by tax reliefs for substantial investment in infrastructure. One MP claimed that observers would be ‘shocked’ to hear that the company believed it should not pay tax.
The problem is that it is a well-established principle of UK corporation tax that depreciation charged in the accounts is disallowed for tax purposes and instead capital allowances are given for investment in plant and machinery.
This does raise concerns over the quality of public debate about tax avoidance. MPs do need to understand what is avoidance and what is not – by most definitions claiming capital allowances is not!
Date: 26th April, 2013
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