Favorable Tax Draws Companies to Britain
At least 20 multinationals are drawing up plans to move their regional or global headquarters to Britain over the next year after government efforts to increase the competitiveness of the U.K.’s business tax regime.
Ernst & Young, the professional services firm, said the country was successfully competing with low-tax countriessuch as Switzerland and Singapore as a base for multinational companies.
The firm told the Financial Times that the 20 planned moves it was aware of would create about 2,000 highly paid jobs and generate several hundred millions of pounds of extra corporate, employment, and consumption tax revenues.
“We are seeing the U.K. win more often than it loses. That is a transformation,” said John Dixon, head of U.K. tax at Ernst & Young.
His comments offer welcome encouragement for the Treasury, which has widely reformed the corporate tax system after a spate of multinationals moved their tax base out of Britain in 2008.
Last month, David Gauke, a Treasury minister, trumpeted Britain’s tax advantages in Washington in what the Treasury said was “an unashamed bid to promote the U.K. to U.S. businesses.”
He pitched to companies including Seadrill, an offshore drilling company which had said it was considering moving its management from Stavanger in Norway to London, Dubai, Singapore, or Houston.
Several companies have already moved global headquarters to Britain, including Aon and , both insurers, and Ensco and Rowan, both drilling contractors, and Delphi Automotive, a vehicle component manufacturer.
In August WPP, the world’s largest advertising company, announced plans to move its tax base back from Ireland.
The U.S. is the biggest source of companies considering moving to Britain for tax reasons even though the country’s Internal Revenue Service tightened its rules in June to make it harder for U.S. companies to change their domicile.
Asian and European companies — including several big companies with regional headquarters in Switzerland — are also eyeing Britain, E&Y said.
Mr. Dixon said that publicly announced global headquarter moves — often involving the relocation of just a small number of senior executives — were just “the tip of the iceberg.” Many more jobs were created by regional headquarter moves — often involving marketing, sales, distribution, and procurement — which are frequently undertaken without publicity.
Securing new headquarters would go some way to reversing Britain’s slide in inward investment, resulting from its dependence on financial services. E&Y said inward investment created nearly 30,000 jobs in 2011 from 679 projects, down 7 per cent from 2010. The U.K. was at risk of losing its position as Europe’s top destination for foreign direct investment to Germany within two years, it said.
Mr. Dixon said the U.K. business tax regime was now “fully competitive” when benchmarked against other countries, as a result of a planned cut in the corporate tax rate to 22 percent in two years’ time, a new tax break for patent income, new rules on foreign profits and tax-deductible interest costs.
Mr. Dixon said there were also “signaling benefits” from the chancellor’s Budget decision to cut the 50p top personal tax rate to 45p, describing the move as “another bit of wind in the sails.”