Several UK energy companies were accused on 30 October 2013 for abusing a legal loophole with a view to cut their tax bills. It was revealed by The Independent newspaper and Corporate Watch research that more than 30 UK businesses have been exploiting advantage of the so-called “quoted Eurobond exemption.” It created opportunities for firms to allow loans with high-interest from their owners, via the Channel Islands Stock Exchange. Since the payment of interest are going overseas and are issued through the Channel Islands, they are able to exit the UK tax-free, rather than attract the usual 20 percent withholding tax.
It was investigated by the paper that one of the gas distribution companies allegedly avoided an estimated GBP72.5m (USD117.2m) in tax. A further two firms are each alleged to have saved more than GBP30m.
Several companies in the UK have recently been in the attention about alleged irregularities in their tax affairs. The UK government is working with the OECD to address base erosion and profit shifting, and this work will include consideration of rules on the treatment of cross-border transactions.
