Targeted Review of Corporation Tax for Water Companies by Alvarez & Marsal

About

The Water Services Regulation Authority awarded a contract to Alvarez & Marsal Global Forensic and Dispute Services LLP for a targeted review of corporation tax.

The review aimed to give confidence in companies' approach to projecting tax in their Business Plans at PR14, improve understanding of water companies' individual tax positions and the actual impact of recent changes compared to business plan projections, consider and evaluate options for funding tax at the 2019 price review (PR19), and consider further options to improve transparency in reporting of the corporation tax charge for the regulated business.

The scope included building on Ofwat's analysis of differences between actual and allowed corporation tax at PR09 for all 18 companies, assessing risk sharing mechanisms, and conducting detailed review meetings with a small number of specific companies (possibly 6) that were outliers or significant when considering the ratio of customers' bills to tax allowed.

Key tasks involved further analysis of differences between actual and allowed corporation tax at PR09, evaluating options for funding tax at PR19 that deliver the best outcomes for customers and incentivise companies to minimise their tax bill and provide good quality estimates of tax charges, proposing and evaluating options for improving transparency of reporting, and attending and leading meetings with a small number of companies.

The contract value was £80,000.