Flow of UK firms moving tax bases here gathers pace

THE FLOW of UK companies moving their tax bases to Ireland continues to gather pace as asset manager Henderson Group and engineering firm Charter Group are set to become the latest UK firms to make the move. Moreover, Brit Insurance has also indicated that it is considering a redomiciliation, while several other major UK corporates are reviewing their options.

Both Henderson and Charter yesterday announced that they are to follow the lead of other UK companies such as pharmaceutical firm Shire and media group United Business Media in establishing new holding companies which will be tax resident in Ireland. The companies will be incorporated in Jersey, most likely to avoid paying stamp duty on Irish shares.

Ireland's 12.5 per cent corporation tax rate is a major incentive for such a move, but according to one Dublin-based tax expert, another major issue is the complexity of the UK system. He points out that seven or eight years ago, UK tax legislation filled just one legal volume - now it fills three - and the range of incentives which the UK tax authorities have introduced in recent years have complicated the regime rather than made it more attractive.

Henderson, which is one of Europe's largest asset managers, had previously indicated that it was considering such a move, but confirmed it yesterday. Chief executive Roger Yates said that as the firm's business becomes increasingly global, it would be better served by an international holding company "that is designed to help protect the group's taxation position and better facilitate its financial management".

The asset manager benefited from deferred tax assets to pay tax at a rate of just 11.7 per cent in 2007, but from 2009, the firm would have "reverted closer" to the statutory rate of 28 per cent if it had stayed in the UK.

Charter Group, which has revenues of €1.8 billion, said that Ireland was the most appropriate location for its tax domicile because of its less complex taxation system and business infrastructure. Chief executive Michael Foster said the move will lead to lower tax and compliance costs for the group, while he also cited the growing internationalisation of the group's two engineering businesses, ESAB and Howden, as being a driver behind the move. UK sales for the two businesses are now estimated to be less than 5 per cent.

Brit Insurance, the Lloyd's of London underwriter, also announced on Wednesday that it is considering a redomiciliation of its tax headquarters away from the UK, and will make a decision on the issue within the next six months.

The only legal requirement for firms looking to domicile their tax base in Ireland is that the board of directors is located here. However, it is hoped that in the same way that IFSC companies initially set up small Irish operations which they gradually expanded, these new headquarter companies might follow a similar track. Charter will initially employ a "handful" of people in Dublin, but said that in time it would look to expand its range of Irish-based activities.