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More companies consider abandoning UK as tax domicile

Of the 50 senior finance or tax professionals polled across the FTSE-100 and
FTSE-250, 14% of respondents say they are actively considering moving tax
domicile, compared with 6% a year before. Four of the companies considering a
move are FTSE-100 constituents, compared with just one in 2007.

In 2008, 2% of respondents reported they had already redomiciled since KPMG
last asked them ­ and 75% of all
companies
polled
that admitted they were now considering redomiciling are
large businesses, with a turnover in excess of £1bn a year. The number of
companies that say they have no plans to consider redomiciling is unchanged in
2008 from the previous year.

“It seems that those who have looked at the implications of moving, but
dismissed it in the past, are now actively considering it, leading us to think
this may be a result of their seeing other companies leave and thus some sort of
precedent being set,” the accounting firm says of the results.

Consistent with the flurry of large UK listed companies that redomiciled for
a better tax environment in Ireland in 2008 ­ including Shire and advertising
giant WPP ­ KPMG’s report puts Ireland top of a list of eight competitive tax
domiciles, with the UK languishing behind the Netherlands and Luxembourg.

That said, 4% of respondents say the UK is the first choice for tax domicile,
compared with 2% thinking this in 2007. It slipped down the ranks as a second or
third choice tax destination, while Luxembourg and the Netherlands made
comfortable gains on being first choice for UK companies in 2008’s survey.

In 2008, controversy over the UK’s controlled foreign companies regime ­
under which the profits of overseas subsidiaries of UK-resident parents can be
subject to UK tax ­ and the way foreign-earned dividends are taxed in the UK
pushed a glut of high-profile UK companies to move to Ireland.

“The way in which the UK tax regime reaches out to tax profits earned
overseas is at the heart of many businesses’ dissatisfaction,” KPMG says. “These
rules were explicitly named as the reason for some of the high-profile
departures this year and are the subject of an ongoing reform process.”

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