UK regime change taxing for Ireland

By lowering corporate and intellectual property taxes the UK is after a larger slice of the FDI cake

Here’s a question. “With low tax, less regulation and a talented workforce, X is one of the easiest places to start a business”; so what’s X?

Ireland, I hear you say? No, it’s a message the UK’s equivalent of the IDA is sending out about the region. And one which is starting to cause some concern that our closest neighbour might just be out to steal our lunch.

Indeed while Ireland’s ability to attract foreign direct investment (FDI) is something we hear a lot about, it’s easy to forget just what a formidable force the UK is when it comes to attracting FDI.

While it might have had a patchy record in years gone by, cracking down on controlled foreign corporation (CFC) rules, it’s putting up a very different front today.

“In the last two or three years it has really got its act together,” notes Adrian Crawford, a tax partner with KPMG.

Indeed in 2011, the UK attracted more projects than any other European country, generating more than a thousand new jobs each week, as some $53.9 billion poured into the region.

And with a stated goal of becoming the most competitive tax system in the G20, the UK is becoming more and more attractive as it reduces its headline corporation tax rate down to 21 per cent, introduces an innovation or “patent box”, and facilitates an RD regime that doesn’t depend on a base year – as it does in Ireland.

Technology hub

After all, while we might like to think of Ireland as the European technology hub, home to Google, Facebook and “Silicon Docks”, the UK has proved itself to be more than adept at attracting such names.

In October, EON Reality, an American 3D technology specialist, chose Manchester as the location for its new European headquarters, while US software giant MapR, will open the doors to its new London site in January.

But why London?

Despite recent efforts to gradually reduce the headline corporation tax rate, the UK still remains far less attractive than Ireland, and the cluster of companies in sectors like medical devices, pharma and social networking must be a pull. However, it’s also a disadvantage, as companies struggle to hire staff in these rapidly growing sectors.

According to Jack Norris, VP of marketing with MapR Tech, the choice of London was influenced by the fact that some of its partners were already located there, as well as of some of the personnel that they were hiring.

When enterprise social networking provider Yammer was looking to launch a European office in 2011, it opted for London because of its access to skilled employees.

It started out with just three staff initially working from each other’s living rooms, and for Georg Ell, general manager of Yammer EMEA, being a part of London’s tech community was important to its development.

“The community is very supportive in helping with anything a business needs to become established. For very young start-ups it’s really valuable as it attracts investment and offers a pool of talent. Any area with a tech culture needs these qualities,” he says.

When Yammer decided to expand, and open its first developer centre outside of San Francisco, London was again the best option.