You ain't going nowhere
There are often suggestions made that companies are set to move their headquarters from the UK, in a protest against Gordon Brown’s anti-avoidance campaigns, amongst other things. A similar suggestion appeared recently in the FT, with advisers arguing that a spate of foreign acquisitions of UK companies could erode the UK tax base.
I’m not sure how much I buy this idea. The first point to make is that if you make profits in the UK, you pay tax on them.
Multi-nationals then use a variety of processes, including shifting debt around, to ‘plan efficiently’ as they might term it, or to avoid tax as critics might describe it.
I don’t really see why having an HQ anywhere else, or by being bought by a foreign company, in any sense increases or reduces these opportunities. The key point to consider in all of those cases is that profits will be moved to a low tax jurisdiction. If the UK is a low tax jurisdiction (and it may well be relative to many countries), the tax base will not be eroded.
It isn’t that easy to move HQ’s abroad anyway, and I think I’m right in saying you’d incur a tax charge in doing so. I can’t claim to be an expert in international tax, however, and would be keen to hear from anyone who thought otherwise on this issue.
What the Treasury really ought to worry about, as far as I understand, are not the location of HQs, but companies deciding to situate new businesses, or new income producing assets, in lower tax jurisdictions.
They may do so for tax reasons, and that is tax that, through the difficulties of the UK tax regime, we would simply be throwing away.