Water company United Utilities is expecting to take a £200m tax charge in 2008/2009 as a result the decision to scrap capital allowances on industrial construction.

'The company is forecasting a one-off deferred tax charge in 2008/09 relating to the abolition of industrial buildings allowances.

'This one-off adjustment is anticipated to be over £200 million and is likely to result in a significant increase in the effective tax rate for the year ending 31 March 2009,' the water utility told the stock market in a trading statement.

Companies have been able to claim an allowance of 4% on the cost of industrial construction. If the structure contained fixtures that were classified as plant and machinery an allowance of 25% was also available.

The decision to scrap capital allowances by Gordon Brown in his last Budget in 2008 will hit water companies especially hard as they embark on large programme of capital investment in water infrastructure.

Further reading:

Read the trading statement here

Q&A: Tim Weller, FD of United Utilities, on its latest results