Another FTSE100 Firm Threatens To Quit UK Over Tax

by Robert Lee, Tax-News.com, London

06 May 2008

As if Chancellor of the Exchequer Alistair Darling didn't have enough on his plate with the ongoing credit crunch, it has emerged that yet another FTSE100 firm is considering switching its corporate HQ abroad in protest at the UK's increasingly burdensome corporate tax regime.

Sir Martin Sorrel, head of WPP - the world's second largest advertising firm - told the BBC on Monday that if the Treasury introduced proposed rules to tax dividends earned by companies overseas in the UK, it could tip the balance in favour of relocating the firm's tax residence to a jurisdiction which does not tax such income, with Ireland likely to be top of the list.

"If the measures as is are introduced, ratified, confirmed and implemented, we will be taking a very serious look at the advantages and disadvantages [of moving its tax domicile and headquarters]," Sorrel was quoted as saying.

Sorrel's comments come hot on the heels of decisions by Shire Pharmaceuticals and United Business Media to set up holding companies in Jersey and relocate their corporate HQs to Ireland to cut their UK tax bills.

He went on to point out that WPP already pays a significant sum in tax to the Treasury each year - about GBP200mn (USD394mn) - and the proposed new rules could add tens of millions of pounds to the company's annual tax bill in the UK.

"We are talking about very very significant sums of money," he noted.

The government's proposals are designed to prevent companies shifting assets abroad in a bid to reduce their UK tax bill. The Treasury argues that concessions to companies elsewhere in the proposals will make the changes broadly revenue neutral. However, the business lobby argues that the new rules will merely serve to complicate UK corporate tax rules further, and are more evidence that the government is failing to listen to the concerns of multinationals on this issue.

“Firms are seriously concerned about the high level and rising complexity of taxation in the UK and are increasingly prepared to vote with their feet. The Treasury cannot ignore this issue or argue that companies are crying wolf," said Richard Lambert, Director-General of the Confederation of British Industry (CBI).

“The prime issue in this case is the complex UK practice of taxing profits earned abroad once they are remitted to the UK, raising the potential for double taxation. This makes the UK less attractive to internationally-mobile firms," he observed.

Last month an independent taskforce commissioned by the CBI published its analysis of the UK corporate tax regime and argued that the system was in need of a radical overhaul if the UK is to remain a location of choice for multinational firms.

To help reduce double taxation and compliance costs for business, the CBI taskforce advocates the government plays a leading role in EU and OECD discussions on further coordination of national tax systems.

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