Firms look at shifting tax base overseas

Feb 15 2010 by Karen Dent, The Journal

HALF of Britain's top 30 firms have looked at shifting their tax base offshore and a handful say they are actively considering such a move.

The threat of an exodus that could cost the state billions of pounds comes a week before the Treasury is due to hold discussions over reforms to the taxation of foreign profits – a key area of contention for major firms.

Last week, Unilever and Diageo fuelled the debate by warning that they could move overseas if the tax regime worsens. Of the top 30 companies in the FTSE 100 Index, 15 said that they were keeping their tax domicile status under review. Three said they were actively considering a move.

However, groups such as BAE Systems, which has a factory on the former Vickers site on Scotswood Road in Newcastle, are thought to be unlikely to move because of the number of large Government contracts they have.

High rates of personal taxation – in particular the 50% top tax rate that takes effect from April and the £30,000 levy on non-domiciled individuals – were also factors in pushing people and companies to consider a move, it was reported.

Paul Smith, head of international tax at Grant Thornton, said: “The rate of income tax on a company’s most senior employees is now higher in Britain than in most other countries.”

Advertising group WPP, drugs firm Shire and publisher United Business Media have all shifted their tax bases to Dublin in the past year.

The departures followed HM Revenue & Customs’ plans to extend the tax net to catch more income earned overseas, including from intellectual property such as brands, designs or patents.

Revenue officials are reportedly due to meet lawyers, accountants and company representatives on February 23 to discuss proposed changes, which experts say could address many of the concerns.

“It is definitely a helpful step, but we need to know much more about the detail,” Andrew Roycroft of City law firm Norton Rose said.