The FT has recently reported (see “Favourable tax draws companies to Britain” – 7 October 2012) that at least twenty multinational companies 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 UK’s business tax regime.
In from the cold
We reported in our blog in August (Companies move back in, but lightning won’t strike twice, 20 August 2012) that, against the backdrop of the huge success of the 2012 Olympics, HMRC had received some encouraging news that the extensive reforms introduced to the taxation of the foreign profits of companies over the last five years is starting to bear fruit. The FT’s article is further evidence of the fact that, for the big boys and girls of the corporate world at least, UK Plc is open for business.
The Treasury has been trying to entice multinational companies back to UK shores for some time. In March 2011, George Osborne unveiled a package of reforms for the corporate sector and set out a bold vision for a lower tax future:
“Let it be heard clearly around the world – from Shanghai to Seattle, and from Stuttgart to Sao Paulo: Britain is open for business.”
The Chancellor trumpeted the fact that his plans would give the UK the lowest rate of corporation tax in the G7 and that by 2014-15 the UK’s tax rate would be 16 per cent lower than America, 11 per cent less than France and 7 per cent lower than Germany (see Financial Times, “Chancellor shakes up UK corporation tax” – 23 March 2011).
Gaucke in the US
The FT’s article of 7 October reports that David Gaucke, the Exchequer Secretary to the Treasury, on a visit to Washington, has been promoting the advantages of the UK’s tax system to US companies such as Seadrill, an offshore drilling company and that the US is the biggest source of companies considering moving to the UK for tax reasons. Not surprisingly, the IRS has not reacted with enthusiasm to US companies being snapped up by UK Plc and has introduced new rules making it harder for US corporates to change their domicile.
Flight of the super-rich
The multinationals are clearly heeding the UK government’s siren calls to return to good old Blighty and they are not, it seems the only ones. As reported in the Metro (9 October 2012) homeowners in France are retreating to Britain to escape tax rises. The paper reported that the exodus of the super-rich has led to panic on the property market with more than 400 luxury homes in Paris put up for sale since May – double the same period last year. Many are fleeing Francois Hollande’s looming 75 per cent tax on earnings over £750,000 and the Metro recorded that David Cameron said he would “roll out the red carpet” to wealthy French citizens who wanted to pay taxes here.
It is, no doubt, a laudable aim for the UK Exchequer to seek to encourage large corporates and the super-rich to relocate to the UK. It is interesting to contrast this policy with the government’s dislike of certain jurisdictions that are in its view tax-havens. Vince Cable, Business Secretary, recently pledged at the Liberal Democrats’ autumn conference to work with allies to close down tax-havens: “No one keeps their cash in tax-havens for the quality of investment advice; these are sunny places for shady people”.
It would appear that it is perfectly legitimate for the UK to seek to attract companies and wealthy individuals to the UK with relatively low tax rates, but if the likes of Monaco adopt a similar policy they are demonised!