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Latest 30 May 2024

Tory treasurer’s offshore water company bagged £1.2m contract with the taxman

Shutterstock/ Claudio Divizia

Lucrative deals between the government and a water company owned by Tory treasurer and mega-donor Graham Edwards are under the spotlight.

HM Revenue and Customs has paid out £1.2m to Castle Water, a company owned through an offshore holding company based in the British Virgin Islands. And the man behind Castle Water is Tory mega-donor Graham Edwards, who previously used the proceeds of a tax avoidance scheme to buy a country manor on the banks of the Thames.

Castle Water has a notoriously poor record and currently is not profitable – relying on huge loans from its offshore holding company to stay afloat. The regulator, the Consumer Council for Water, lists it as one of the worst performers in the industry.

In 2018, the council ordered Castle Water to address its excessive number of complaints, but over the following four years it received 12,500 complaints from customers.

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Neither Castle Water’s failings nor Edwards’s previous tax avoidance stopped Rishi Sunak appointing him to run the Tories’ finances in 2022. Perhaps the tycoon’s £5.5m of donations helped Sunak to overlook his past record.

Our investigation with the Daily Mirror also found that Castle Water bagged a £10m deal with the Ministry of Defence and contracts totalling over £500,000 with the environment department.

“Nobody sets themselves up in a tax haven without good reason,” said Good Law Project Executive Director, Jo Maugham. “And the reason is usually to avoid paying tax – which is why we call them tax havens.”

Another common reason, Maugham continued, “is a desire to benefit from the secrecy those regimes tend to offer”.

“Of course we don’t know what attracted Tory treasurer and mega-donor Graham Edwards to the British Virgin Islands,” he said, “but there are certainly questions to be answered about why HM Revenue and Customs, of all government agencies, gave his firm a contract.”

Speaking to the Mirror, the tax expert Professor Richard Murphy drew attention to the intercompany loans made between Castle Water and its offshore holding company.

“The more than £40m of interest paid by Castle Water Limited on loans due to the British Virgin Islands holding company will almost certainly have attracted some HM Revenue and Customs scrutiny,” Murphy said. Subject to further scrutiny from the taxman, he added, if Castle Water were sold, the company’s structure means that “proceeds received in the British Virgin Islands would likely be tax free”.

Castle Water told the Mirror that the company “is tax domiciled in the UK, so there is no tax structuring going on” and that “it is making a long-term investment in the UK” so “no shareholders have any intention of selling”.

The company also pointed out that it has “more 5* TrustPilot reviews than all other water retailers combined”.

However, companies don’t have a domicile and Castle Water’s TrustPilot page warns that “this company may be asking for reviews in a way that Trustpilot doesn’t support. This can lead to bias and compromise the reliability of reviews”.

A separate source told the Mirror that Castle Water’s British Virgin Islands arrangement was “set up to allow offshore money to be invested in the UK, creating jobs in a deprived part of the country. It is not about tax, it is about investment.”

But the source did not declare the origin of this “offshore money” being injected into the UK water industry.

Castle Water also denied that Graham Edwards had any involvement in winning public sector contracts and said they had “gone through rigorous procurement processes”.

When approached to respond to the revelations, HM Revenue and Customs said, “We no longer have a contract with Castle Water.” The Conservatives chose not to comment at all.