Taxation
We're committed to paying our fair share of tax wherever we do business.
We believe in responsible tax management. This means paying and collecting the correct amount of tax in the right jurisdictions and on time. It also means cooperating with tax authorities and providing the information they require.
The tax we pay, reflects the underlying commercial transactions across our business. This not only fulfils our legal obligations, but we also think it's the right thing to do.
Deciding these matters can involve interpretation of rules and forming judgements. That's why 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
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.
As well as explaining our approach to tax, the Annual Report and Accounts 2023 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.
- 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.
- The movement on the Group’s provisions in respect of uncertain tax positions.
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 2023 the UK Corporation tax rate is 23.5%, being an average of 19% from 1 January 2023, and 25% with effect from 1 April 2023. 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 25%.
- UK gas profits and losses are subject to corporation tax of 30% plus an additional tax (supplementary charge) of 10%, and the Energy Profits Levy (‘EPL’) of 35% (a total of 75%).
- Some expenses, such as business entertainment, are not tax deductible, including the Electricity Generator Levy (‘EGL’). EGL is a levy of 45% on the Group’s receipts from nuclear and renewable generation, where the receipts exceed £75M/wh.
Group 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.
