Hold off on overseas exodus, firms warned

Until proposed changes to corporate tax laws are introduced, companies should be wary of relocating operations abroad, according to Bill Dodwell, tax partner at Deloitte.

Dodwell recommends companies who are considering such a move to hold off until future plans are announced.

Fund manager Henderson Group last week joined the throng of companies heading offshore.

‘Moving is an expensive and complicated operation and it’s best not done lightly… ‘Wait and see what is produced,’ Dodwell said.

‘Why do it when the government might produce something you can cope with?’

The government has already sent strong signals that the original proposals won’t go ahead, such as the most controversial changes to offshore ‘passive’ income.

While it’s difficult to predict what the eventual conclusion will be, Dodwell said now is the time to engage in discussions with the Treasury in voicing concerns about potential impacts the new laws could have on business.

Other companies that have made the move include Shire Pharmaceuticals and insurers Hiscox and Omega.

A statement released with Henderson Group’s interim results last week revealed details of a Scheme of Arrangement, which outlines efforts to serve its shareholders as the business becomes ‘increasingly global’.

According to Richard Acworth, head of corporate communications at Henderson Group, the decision behind the move has been on the cards for some time, and it’s one that’s been carefully considered.

Despite the logistical and operational task in re-establishing the brand’s headquarters abroad, Acworth argues this is outweighed by the advantage derived from more competitive tax regions, such as Ireland.

‘We want to make sure we pay the correct amount of tax and not too much tax,’ he said.

Henderson Group aims to achieve an effective corporate tax rate of approximately 20% per annum from 2009, and expect the effective tax rate in 2008 to remain between 10% and 15%.

The group made pre-tax profits of £147m in the year to 31 December 2007, on sales of £456m. It paid £15m in tax last year, its annual report said.

Facts/Figures

£456m
Revenue to 31 December 2007

£147m
Pretax profits to 31 December 2007