18 July 2011
Titles that covered this story included City AM, 18 July 2011 and the Times, 18 July 2011.
- 58% of large businesses say that they have considered moving abroad due to tax issues
- Corporation tax cut failing to stem the tide
New research carried out for HM Revenue & Customs (HMRC) revealed that one in four (26%)* large businesses are considering relocating part or all of their businesses abroad. Of those, 58% say that tax is the main factor pushing them to relocate.
The research by HMRC also shows that the vast majority (78%) of large businesses feel that the administrative burden of tax compliance has increased over the past year (64% in 2009).
Roy Maugham, tax partner in our London office, comments: “Concern remains that a sizeable chunk of UK plc is still looking for the exit, with tax being the decisive factor. A two per cent cut in corporation tax was announced at the Budget with the intention of enticing businesses back, but so far only WPP has indicated it might return to the UK. Who is to say that it won’t leave again a few years from now?”
“Companies look at the total tax burden when deciding where to be based. Cutting corporation tax is all very well, but it somewhat defeats the purpose to then increase VAT and introduce a 50p rate of income tax.”
“Large businesses are clearly still very concerned that the UK is just not competitive enough on tax.”
Roy adds: “Lack of certainty is also a serious concern for large businesses, yet the Government repeatedly tinkers with the tax system. The increase in the supplementary charge on North Sea oil and gas companies announced at the Budget, without any consultation or warning, is just one example.”
Many UK multinationals have already moved their corporate headquarters overseas in the past few years, warning that the UK is becoming less competitive on tax.
Advertising giant WPP and Shire Pharmaceuticals both left for Dublin to take advantage of the lower corporate tax rates. Other firms that announced they were relocating their corporate headquarters to Ireland for tax reasons over the past year include Lloyd’s of London insurer Beazley; the Willis Group insurance company; industrial technology firm Ingersoll-Rand; and medical giant Covidien.
Roy says: “It’s not just the tax burden, but the complexity and cost of compliance which is a big push factor for large companies. The Government needs to start making headway on tax simplification.”
New proposals designed to ‘reverse the trend of businesses leaving the UK’ have been unveiled this week by the Treasury. The ‘controlled foreign companies’ consultation aims to stop multinationals moving headquarters outside the UK by reducing the amount of tax they have to pay on income generated offshore.
Roy comments: “It will be interesting to see whether the concerns large corporates have about taxation are alleviated by these proposals.”
According to the survey, 36% of large businesses stated that they felt HMRC had a negative effect on the commercial competitiveness of the UK. The businesses mentioned tax rates and legislation as the main tax factors reducing the competitiveness of the UK.
According to one business who took part in the survey, “HMRC has developed a reputation for being much more rigorous – it sees itself as the ‘international policeman’ on tax.”
Other results from the research by HMRC:
- When asked to rate whether their experience of dealing with HMRC had got better or worse over the past 12 months, 58% of large businesses said that they felt the service had not improved
- As with last year, according to large businesses, HMRC’s on-going weaknesses continue to be the transparency of decision making and the ease of access to taxation specialists.
- In terms of key priorities for improvement, large businesses stated the top three as:
- a quicker response to queries
- more knowledgeable staff
- a greater degree of commercial understanding.
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