Taxation

We are committed to paying our fair share of tax wherever we do business.

We believe in responsible tax management. This means paying the correct amount of tax in the right jurisdictions and on time. The tax we pay reflects the underlying commercial transactions across our business. This not only fulfills our legal obligations. We also think it’s the right thing to do.

Deciding these matters can involve interpretation of rules and forming judgements. So we try to be open and transparent about our approach, our decision-making processes and the outcomes achieved. This is in keeping with Our Code, which sets out our commitment to doing the right thing and acting with integrity.

If you have a query about our approach to tax, get in touch via GroupTax@centrica.com.

  • How We Apply Our Approach

    Our approach to responsible taxation applies both to the taxes levied on the business directly and to amounts which we are required to collect from those with whom we do business, such as customers, employees and commercial partners.

    Responsible taxation also extends to our policy on the use of subsidiaries in jurisdictions (‘tax havens’) which levy low or no tax on companies. We will only incorporate a subsidiary in a tax haven where there is a business requirement to do so.

    All our subsidiaries are liable for corporation tax in the country in which they were incorporated, except for two companies which we acquired a number of years ago. The subsidiaries concerned are incorporated in Jersey but pay tax on all of their taxable profits in the UK.

  • Our Tax Strategy

    We understand the increasing demand from many stakeholders for more transparency about the tax affairs of large companies like Centrica.

    We have had a written Tax Strategy for many years and include parts of it in our Annual Report. It has been shared with Her Majesty’s Revenue & Customs because we believe it is important that HMRC fully understands our approach to tax.

    Group Tax Strategy 2019
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  • Tax Disclosure

    As well as explaining our approach to tax, the Annual Report and Accounts (‘ARA’) also includes:

    • An explanation of the difference between the tax charge per the accounts and the cash tax we pay each year to the Governments of countries in which Centrica operates. 
    • Calculation of the adjusted effective tax rate in the UK and outside the UK. The effective tax rate is calculated as the tax charge in the accounts divided by the profit before tax expressed as a percentage. 
    • Separate disclosure of corporate income tax liabilities (disclosed as current tax assets and liabilities in the Balance Sheet) and the amount of corporate income tax paid in the year. 
    • An explanation of the Group’s deferred tax balances, including details of the main components of the asset or liability and the deferred tax charge for the year. 
    • Deferred tax is an accounting measure which seeks to reconcile differences between the accounting and tax treatment of the Group’s assets and liabilities. Tax will be payable or relieved when the difference between the accounting and tax treatment unwinds. 

    For international groups such as Centrica, the effective tax rate is generally different to the UK Corporation tax rate (for the year ended 31 December 2018 the UK Corporation tax rate is 19%). 

    Centrica’s effective tax rate is different to the UK Corporation tax rate because: 

    • The Group operates in countries whose profits are subject to corporation tax rates ranging from 12.5% to 78%. 
    • UK oil and gas profits and losses are subject to corporation tax of 30% plus an additional tax (supplementary charge) of 10% (a total of 40%). 
    • Some expenses, such as business entertainment, are not tax deductible.