Energy distribution firms hit by UK tax change

George Osborne
Image caption George Osborne says he is ensuring fairness for taxpayers

Chancellor George Osborne has announced a change in tax rules to prevent businesses claiming capital allowances for costs met by other firms.

The legislation, which comes into immediate effect, will mainly affect gas and electricity distribution firms.

It will prevent them making new claims for historic costs that have already been paid by their business customers.

HMRC estimates that the claims could have resulted in up to £900m in lost taxes.

The Treasury says that utility companies have claimed £50m in capital allowances since January.

It says the companies have only recently started using a complex legal argument to claim what is a legitimate tax allowance designed to help the economy.

Mr Osborne has said he is introducing the legislation to prevent any further claims.

"The government is committed to competitive taxes to support growth in the UK," he said.

"But it is also only right that companies pay the tax they owe. It is completely unacceptable that utility companies think they can claim for huge amounts of money, that business customers have already covered the cost for.

"By legislating today, we will prevent utility companies from making these claims, ensuring fairness for British taxpayers."

The draft legislation, introduced on Wednesday, will be included in the current Finance Bill.

Meanwhile, HM Revenue and Customs will continue to challenge claims which have already been made unless they are withdrawn by the company applying.

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