Shire’s tax move: foreign legion?

Home sweet home – but board meetings won’t be held at Shire’s Hampshire HQ

Multi-nationals headquartered in the UK are becoming increasingly uneasy
about the UK government’s plans to tighten up rules on foreign profits.

decision last week to change its tax residency from the UK
mainland to Ireland generated more than its fair share of column inches, with
some asking: is the UK uncompetitive, and our tax system in crisis?

What’s happened?

Shire has gone to pains to stress that it has not ‘upped sticks’ and moved
its headquarters from Basingstoke in Hampshire to Ireland.

Jessica Mann, vice-president of global communications says the head office in
Basingstoke will stay put.

‘We are setting up a new holding company which will be incorporated in Jersey
with Irish tax residency. The board of directors will meet in Ireland where
significant decisions will be made about the overall strategic direction of the

She is quick to deny any suggestion the relatively pain-free tax residency
change was just about cutting the conglomerate’s tax bill, but admits Ireland’s
simpler tax regime is ‘easier’ to apply in a corporate structure.

What’s going to happen?

The government is likely to come under pressure to rethink its foreign
profits plans following the move. ‘A large number of companies have certainly
looked at moving and I wouldn’t be at all surprised if some others follow suit,’
says KPMG’s international tax expert Chris Morgan.

For the last few years the government has been tightening the rules for
multi-nationals making it harder for them to manage tax for their overseas

‘If you plan things to reduce overseas tax there is a risk the benefit is
clawed back in the UK which is putting the UK multi-national in a worse position
than the US,’ notes Morgan.

One of the key changes proposed by the Treasury last June was to focus on
type of income rather than on individual subsidiaries.

‘All passive income would be taxed in the UK, if it goes through in its
original draft it is
very draconian. Some companies are thinking it is taking too long for an
equitable balance to be struck and it’s best to get out while they can,’ he

The proposals mean that any interest or finance income would automatically be

taxed in the UK no matter which subsidiary it came from.

Other countries, such as the US, offer wider exemptions, and it looks as if
multi-nationals are starting to vote with their feet.

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