Paul Massara, CEO at RWE npower gives evidence at the Energy Energy and Climate Change Select Committee (Photo: Parliament TV)
Paul Massara, CEO at RWE npower gives evidence at the Energy Energy and Climate Change Select Committee (Photo: Parliament TV)

RWE npower has admitted it paid no UK corporation tax for three years, and justified the non-payment by saying it invested billions of pounds into building infrastructure and power plants which resulted in employment creation for Britain.

Speaking at the Energy and Climate Change Select Committee, RWE npower chief executive Paul Massara told lawmakers that the energy company did not pay UK corporation tax between 2009 and 2011 because of the "very simple reason that [we] invested hundreds of millions of pounds in building power plants, creating jobs, creating employment and help[ed] to keep the lights on."

Massara defended npower's lack of tax payments for this period and said that "this is in no way tax avoidance, and all of our business is taxable in the UK" because the "simple accounting UK rule" meant that investment could be used to reduce the group's tax liability.

"If this country wants to get £110bn (€128bn / $169bn) of capital invested then... you are going to need to allow people that deductibility," he added.

MPs criticised RWE npower for the lack of tax payments, citing npower's total "operating result" over the three years was at £766m profit and therefore should have paid some tax.

"People who pay their taxes unquestioningly are sick and tired of seeing hugely profitable companies use every trick in the book to get out of contributing their fair share.Hard-pressed families struggling with sky-high energy bills will be absolutely astonished that an energy company which makes hundreds of millions in profits doesn't appear to be paying its fair share in tax," said MP for Wansbeck Ian Lavery.

However, Massara said that RWE npower's total pre-tax profit of just £40m during this period, cited by MPs as npower's "operating result", is on earnings before interest, taxation and amortisation basis (EBITA).

RWE npower's CEO also added that corporation tax liability was effectively wiped out by its investments in the UK, which have totalled £3bn for RWE npower since 2008 or £5bn at RWE group level.

Under UK tax law, corporations can claim tax allowances on certain purchases or investments made on business assets.

While a company cannot directly deduct expenditure on those assets when calculating profits or losses, instead it can deduct a capital allowance. Certain types of plant and machinery are included in this clause.

"There is no mystery to it. There is no desire to not pay tax. We have fully paid all our taxes," said Massara.

The stock price for npower's parent company RWE traded over 1 percent lower in early trading at €29.65 as of 0845 BST.