Shire Pharmaceutical said yesterday that it intended to move its tax base from the UK to the Republic of Ireland, arguing that Dublin offered the group an "optimum" tax location.
However, beyond the rather vague explanation that being domiciled in Ireland for tax purposes offered greater "opportunities," Shire declined to comment further on why the group was making the move. A spokesperson for the company did say that, "there are a whole range of issues", but did not cite any.
As well as being tax domiciled in Ireland, the company will become incorporated in Jersey, saying that with just 7 per cent of total sales coming from the UK, Britain was becoming less relevant, with "very little profit being generated" in the country. It is unclear how much of the company's revenues come from the Republic of Ireland.
Analysts at Citigroup, however, backed the move, saying that Shire Limited, the group's new holding company, was likely to face a reduced tax burden as a result. "By taking advantage of Jersey's tax jurisdiction, Shire will avoid any proposed amendments to UK tax law which may see the tax rate increasing to [as much as] 30 per cent." The corporate tax rate in Ireland is 12.5 per cent.
The company said that it had no plans to cut UK jobs or move its main operations from its base in Basingstoke. Commentating on Shire's move, CBI director-general Richard Lambert said. "We are particularly worried that an uncompetitive corporate tax system is spoiling the UK's attractiveness as a place to do business, and that other internationally mobile firms will follow Shire's path."
The Treasury has been lampooned in recent months on a number of tax issues, especially the abolition of taper relief on capital gains tax and its treatment of non-domiciled taxpayers.
Meanwhile, a report published by Ernst & Young last month warned that "the UK corporate tax rate is being usurped by other locations despite the forthcoming cut in the main corporate tax rate". A Treasury spokes-man said the Government had cut corporation tax to 28 per cent from 30 per cent and that the UK offered the lowest rate of headline corporation tax of anywhere in the G7.
Shire joins other firms such as the insurer Hiscox and the computer games group Electronic Arts which have also moved away from the UK for tax reasons.