British Airports Authority, which owns and operates seven UK airports, including London's Heathrow, has warned that it could face additional tax of GBP1.4 billion (USD2.78 billion) if the UK government goes ahead with plans to phase out a key tax relief.
Grupo Ferrovial SA, the Spanish group which owns BAA, has announced that it would lose tax relief on about GBP5 billion that it has spent on its core infrastructure if the government carries through on its proposal to abolish the Industrial Building Allowance (IBA).
Former Chancellor of the Exchequer and current PM, Gordon Brown announced in 2007, in his last Budget as head of the Treasury, that the relief would be phased out over three years, starting 1st April, 2008. IBA allows relief for the cost of industrial buildings by providing for a deduction against profits chargeable to corporation tax, and is given at an annual rate of 4% of cost for 25 years. It is claimed by business with large infrastructure assets, such as those in the transport, communications, energy and water supply sectors. But, despite a strong lobbying effort from industry, the government reiterated its intention in December last year to forge ahead with the phase-out.
Grupo Ferrovial said that the accounting impact of the tax change on BAA was still being worked out, but would be likely to create GBP1.4 billion in the form of a deferred tax payment which "does not imply any actual cash payment". However, the tax change could wipe GBP1.23 billion off Grupo Ferrovial's 2008 profits.
The Spanish company is continuing its efforts to persuade the government to rethink the proposal, arguing that abolishing IBA would be detrimental to investment in the UK.
"BAA will continue to argue that the proposed abolition of IBAs is unwarranted and will have a negative impact on the attractiveness of the UK as a place in which to invest," it stated.
BAA owns Heathrow, Gatwick, Stansted, Aberdeen, Glasgow, Edinburgh and Southampton airports.
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