Thames Water has defended itself against criticism over its tax arrangements, which saw Britain's largest water company pay no corporation tax this year.

Stuart Siddall, Thames Water finance director, said: 'We have an absolutely clear conscience about everything we are doing. Everything is transparent. We are reviewed by HMRC every year as a major corporation and we are seen as low-risk because our tax is very straightforward.'

He was speaking as the company released results which showed its pre-tax profits in the year to March 2013 fell by 35% to £144m due to a combination of bad weather, customers defaulting on bills and rising energy costs. Thames Water booked a £5.1m tax credit and said that although it paid no corporation tax it paid business rates and other taxes which amounted to about £150m.

In a statement, the company said: 'We have not paid much corporation tax in recent years because the Government's tax system allows us to delay, not avoid, payment of tax based on how much we invest. Because we are investing £1bn a year from 2010 to 2015, more than any water firm in the UK's history, we are able to defer a lot of tax payments to future years.'

Writing in the Daily Telegraph Ofwat chairman Jonson Cox described some of the profits and tax-reducing corporate structures used by utility companies as 'morally questionable', saying the use of high-coupon loans to shareholders and complex offshore holding structures to reduce tax liability were both liable for criticism.

In his article, the regulator said he had yet to find an unlisted water company that fully complied with the UK corporate governance code 'or satisfactorily explains why not'.

Siddall said Thames Water's accounts were 'very transparent' and gave 'good reasons' for not complying with parts of the code over the number of non-executive directors on its board.