Recession tempts more to leave UK

The UK recession is spawning a new wave of medium-sized companies seeking to redomicile their headquarters offshore, with the Treasury potentially losing billions in future tax revenues, according to experts.

Lloyd’s of London insurer Beazley recently announced it is relocating to Ireland, where it will benefit from a 12.5% corporate tax rate, and Brit Insurance confirmed it was quitting Britain in favour of Holland.

Barry Spencer-Higgins, principal of SCF Group, said he has seen an increase in medium-sized companies with turnovers between £5m and £10m looking to move abroad.

‘Right now, the UK is not an attractive place for many of these businesses to be. They can’t afford to be here if they’re to survive,’ he said.

Spencer-Higgins said businesses redomiciling can expect to save between 30% and 50% on their UK tax obligations. ‘Since the banking crisis we have seen a significant increase in medium-sized companies considering fiscal migration,’ he said.

He added as many as 60 clients are considering restructuring their corporate affairs outside of the UK, resulting in more than £100m being lost to the Exchequer. ‘If we are representative then the potential loss could run into billions,’ he said.

Richard Mannion, national tax director at Smith & Williamson, was aware of one company which was making a £20m profit in the UK and halved its tax bill by relocating abroad. ‘They were doing it to save money in the downturn. Once a business like that is lost it’s lost long term,’ he said.

A Treasury spokesman said it was ‘fully committed’ to ensuring the UK’s tax system attracts economic growth and investment from multinational businesses.