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It's too early to trumpet Britain's competitive transition

As two of the company bosses who endorsed David Cameron’s economic vision before this year’s general election, Ian Cheshire of Kingfisher and Andrew Witty of GlaxoSmithKline did much to promote the idea that the Conservatives were friendly to big business.

This week Mr Witty went a stage further, announcing a £500m investment in British manufacturing, choreographed to coincide with government reforms to the regime for taxing UK companies’ intellectual property-generated earnings.

No wonder George Osborne, the chancellor, was smiling as he made his Commons statement.

Yet it is a little early to be trumpeting Britain’s transition to being the most competitive regime in the G20, as Mr Osborne did on Monday.

True, the headline rate of corporation tax will come down during this parliament, from 28 per cent to 24 per cent. And the planned changes to the Controlled Foreign Companies (CFC) regime will loosen some of the legislative shackles that led so many blue-chip companies to flee to sunnier tax climes.

But for a clue as to why all the back-slapping looks premature, one need look no further than Mr Cheshire.

I have learnt that Kingfisher, the DIY retail group that owns B&Q, is exploring the establishment of a new offshore subsidiary to house the company’s intellectual property assets.

Under the plan, Kingfisher’s brands would be domiciled in a tax-efficient vehicle (possibly incorporated in Switzerland) and licensed to its operating companies.

People close to the group estimate that such a move might save it as much as £30m annually, approximately 5 per cent of the £660m consensus pre-tax profit forecast for this year by City analysts.

For shareholders, that would seem to render it an open-and-shut case, although given Mr Cheshire’s ringing endorsement of the Conservatives (he shared a stroll with Mr Cameron round a B&Q store during the election campaign), it might be mildly embarrassing to the prime minister.

Source : Mark Kleinman - FT.com

04 December 2010
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