The Government offered an olive branch to big business yesterday by pledging tax cuts on foreign subsidiaries but lawyers warned that it will not be enough to staunch the flow of companies relocating abroad.
Alistair Darling said: "I will maintain a focus on the long-term competitiveness of the UK and to increase our attractiveness as a base for global businesses. To do so, I will introduce an exemption for foreign dividends in 2009 for large and medium businesses, and improve our rules for taxing Controlled Foreign Companies."
The policy is expected to cost the Treasury £275m by 2012.
The Government initially proposed the foreign dividend exemption for next year, before delaying it until 2010. The plan to bring it forward yesterday was well received in the City.