Is Wolseley's Swiss switch the start of an exodus?

The UK taxes that prompted the plumbing group's move to Switzerland could force others to follow suit

Leaf through The Economist magazine and it is difficult not to notice the adverts placed by a number of emerging market countries, encouraging businesses to move to such places as Macedonia. The young population is highly educated, they promise, and they don't demand high wages. And, crucially, the rate of corporation tax is much lower than in Western Europe. No doubt all the claims are true, but to date few, if any, major companies in the UK have taken the Skopje administration up on its offer.

Yet Wolseley, the world's biggest plumbing and heating products supplier which can trace its British roots back to 1889, said yesterday that it was moving its tax domicile to Switzerland. The firm, which trades in 25 countries, said a new holding company will be UK listed, incorporated in Jersey and have Swiss tax residence. All because the group, like a number of others in recent years, thinks it pays too much UK tax.

"Our underlying tax rate has now moved up to 34 per cent. By redomiciling to Switzerland that tax rate will come down to about 28 per cent," the chief executive Ian Meakins said. His finance director, John Martin, said if Wolseley was already domiciled in Switzerland, it would have saved £23m in the year to 31 July.

Mr Martin blamed Britain's controlled foreign company (CFC) tax regime, which applies UK tax on overseas earnings, for the decision to switch. Under CFC rules, UK-domiciled companies are subject to a charge for tax on undistributed income of low tax controlled foreign companies of which they are shareholders. It is especially problematic for groups such as Wolseley that rely on large overseas earnings. "It is 100 per cent the CFC regime in the UK. It's not very helpful to Wolseley. The principle reason for that is 81 per cent of our revenue is from outside the UK," he said.

Mr Meakins said the decision had been discussed with the Government, but that despite consultations on CFCs, "it is hard to see how the Government can solve the problem." He added: "We don't want to go to Switzerland, but the tax number is enormous. We are charged with creating shareholder value, and they were saying to us, what are you going to do about the rising tax charge? I'm quite sure that our move today will prove a catalyst for more conversations at other companies."

With investors pushing for ever greater returns, moves such as the one proposed by Wolseley may seem obvious, but a number of tax specialists point out that a decision to change is not always as clear-cut. "Tax regimes change all the time, and what may look attractive today may look less enticing in two or three years," said John Cullinane, tax partner at Deloitte. "The CFC rules have been around since the early 1980s, but add on to that the 50 per cent income tax rate and the limited tax relief on pension contributions and the whole situation can become a tipping point for some companies."

Wolseley is the latest in a growing list of companies to have left the UK for tax purposes after similar moves from the likes of WPP, Shire and Informa in the last couple of years. But it is the first since the general election in May. In July, the Chancellor, George Osborne, repeated a rallying call from the Coalition, saying that Britain is "open for business", adding that he would reform "the complex controlled foreign company rules that have driven business overseas".

It moved too slowly for Wolseley. In response to the group's move, a Treasury spokesman said: "The Government's long-term aim is to create the most competitive corporate tax system in G20 and in the Budget announced a 4 per cent reduction in the main rate of corporation tax. The Government is committed to reform of the controlled foreign company rules and will introduce new rules in 2012. Any changes will deliver a more territorial approach, refocusing on artificially diverted UK profits and exempting genuine commercial activities."

The UK's corporation tax rate is 28 per cent, compared to 21.17 per cent in Switzerland and 12.5 per cent in Ireland, the tax residency of WPP and Shire.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
Mark Wright and Bianca Miller in the final of The Apprentice
tvMark Wright and Bianca Miller fight for Lord Sugar's investment
Arts and Entertainment
X Factor winner Ben Haenow has scored his first Christmas number one
music
Arts and Entertainment
James May, Jeremy Clarkson and Richard Hammond in the Top Gear Patagonia Special
tv
PROMOTED VIDEO
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
News
Claudia Winkleman and co-host Tess Daly at the Strictly Come Dancing final
people
News
i100
Extras
indybest
News
peopleLiam Williams posted photo of himself dressed as Wilfried Bony
Sport
Martin Skrtel heads in the dramatic equaliser
SPORTLiverpool vs Arsenal match report: Bandaged Martin Skrtel heads home in the 97th-minute
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
The Apprentice finalists Mark Wright and Bianca Miller
tvBut who should win The Apprentice?
News
The monkey made several attempts to revive his friend before he regained consciousness
video
Extras
indybest
News
Elton John and David Furnish will marry on 21 December 2014
peopleSinger posts pictures of nuptials throughout the day
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick