Diageo threatens to quit UK over tax

The drinks giant Diageo yesterday became the latest large British company to say it is considering leaving the UK for tax purposes.

Paul Walsh, the chief executive of Diageo, said the maker of Guinness and Baileys Irish Cream had no current plans to relocate its global headquarters away from London but warned it would have to reassess its options if the system became less favourable at a corporate or individual level.

"We are a global company. We enjoy being headquartered in London, but if the tax regime here in the UK became so egregious, either for corporates or individuals, we would have no option but to look at other alternatives," he said in an interview on BBC World Service.

His comments follow a similar warning from Paul Polman, the chief executive of Unilever, yesterday. He argued that multinational firms have choices about where to locate research and manufacturing facilities, as well as where to base senior management, and warned that new regulation and tax burdens would be "unfortunate" for the UK.

Over the past two years, the pharmaceuticals specialist Shire, the media firm United Business Media, the advertising company WPP and the temporary office supplier Regus have either moved, or announced plans to shift, their corporate headquarters to the Republic of Ireland for tax reasons.

This week, the investment broker Hargreaves Lansdown said it was more than tripling its interim dividend before the end of the tax year to give a fillip to its shareholders who face a 10 per cent rise in the top rate of income tax to 50 per cent from April.

Yesterday, Diageo declined to say how many of its UK employees earn more than £150,000, which is the level at which the tax comes in. It employs 6,000 people in its headquarters in London.

Mr Walsh called for the level of corporation tax to be trimmed and demanded a more simplified and a less frequently changing tax regime in the UK.

But a Treasury spokesman said: "The UK is one of the most attractive places to do business and continues to have the lowest corporation tax rate of the major G7 economies, this is alongside an internationally competitive Small Companies Rate of 21 per cent."

Mr Walsh's comments came as Diageo posted a 1 per cent fall in pre-tax profits to £1.39bn for the six months to 31 December.

Francesca Lagerberg, the head of tax at Grant Thornton, said: "Today's news that Diageo might leave the UK is a massive blow to UK plc and to the Treasury's coffers."

A number of wealthy business leaders, bankers and hedge funds have recently relocated away from the UK to Switzerland and the Channel Islands because of the tax burden.

Guys Hands, whose private equity firm Terra Firma controls the music group EMI, moved to Guernsey in the spring of 2009 in protest at higher income and capital gains taxes.