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Other companies to have moved offshore recently are tight-lipped or cautious about redomiciling in Britain
George Osborne's claim that tax cuts in the budget showed "Britain is open for business" has been boosted by advertising company WPP, which says it is likely to move its tax base back to the UK – having relocated to Dublin in 2008.
But any hopes that the announcement by Sir Martin Sorrell, chief executive of WPP, would lead to a torrent of companies rushing back to Britain were quickly dashed.
Five companies contacted by the Guardian – Shire Pharmaceuticals, fund managers Henderson, engineers Charter, plumbing supplier Wolseley and credit checker Experian – indicated they would not follow suit immediately as a result of the budget cut in corporation tax from 28% to 23% in 2014 and changes to the way overseas profits are taxed.
They either refused to comment on the changes or said they would make little difference to their decision to relocate from the UK. Media business company Informa said its board would consider the changes in "due course".
In what appeared be to a carefully stage-managed announcement, Sorrell used an early morning appearance on the BBC's Today programme to declare his support for the changes in the budget that will cut the tax paid by UK-based companies on overseas earnings by three quarters. Barely two hours later, Osborne was also on the programme and welcomed WPP's potential return.
Before the budget, there had been speculation that the Treasury was aiming to get a high-profile company to announce its return to Britain. Business publisher United Business Media, which left three years ago, was first to oblige in the hours after Wednesday's budget, saying that it was "actively reconsidering" its tax base.
Sorrell said: "I wouldn't say it was orchestrated or choreographed." But he admitted there had been discussions between the government and WPP for many months, and particularly since the Davos summit.
"The coalition from the very beginning had said it was crucially important that Britain had a competitive tax landscape," he said. "They've gone further than I expected on corporate [tax] and also on personal taxation." The higher income tax rate of 50p is expected to be cut.
Sorrell said WPP's 16-strong board needs to discuss the potential return to Britain and that shareholders would be given a vote.
The changes to the so-called controlled foreign companies (CFCs) regime are being made to try to lure back the companies that have left Britain. Bill Dodwell, head of tax at Deloitte, said the trend had begun when Experian was spun out of retail group GUS in 2006 and chose Ireland as its domicile.
Experian said it had "no plans" to move its headquarters to London from Ireland while pharmaceutical company Shire – which moved to Dublin in 2008 – said: "We'll look at the detail of these interesting proposals but at this stage our position remains unchanged."
Wolseley, which moved to Switzerland this year, refused to comment as did Charter, while Henderson said the company was "watching the situation closely" but had yet to see anything to encourage a reversal of the move to Dublin.
Informa – which moved to Switzerland in 2009 – said: "We welcome the proposed reforms to UK corporation tax and the board in due course will consider the long term implications of these changes".
Osborne's budget prompted the Irish employers' organisation to call for countermeasures to encourage companies to stay in the Republic. The Irish Business and Employers Confederation (Ibec) said that, as well as robustly defending the Republic's low corporation tax rate, the new Fine Gael-Labour government should introduce "cost-neutral" measures.
Fergal O'Brien, chief economist for Ibec, said Osborne's plans could make the UK more competitive in terms of company taxation. But he did not think UK companies that had relocated to Ireland would be "rushing back to Britain".
The Irish government declined to comment on Osborne's move. What the British government chose to do in relation to corporation tax was "a matter for the UK – that is their prerogative", said a spokesman at the Irish department of finance.
Other budget tax changes prompted an angry reaction in the Lords from former Liberal Democrat treasury spokesman Lord Oakeshott. He quoted a tax expert in the Guardian who said there had been a "huge sigh of relief" that the government had not hit non-domiciled individuals harder. Oakeshott said the chancellor had "bottled out" by saying there would be no further changes to non-dom taxation for the rest of the parliament – after allowing individuals to bring funds on shore as long they are invested in Britain.
A history of CFCs
Sir Geoffrey Howe was the first chancellor to tackle the issue of taxing profits that UK companies made overseas. The suspicion was that UK-based companies channelled money overseas to lower-tax regimes in order to cut their tax bills.
Bill Dodwell, head of tax policy at accountants Deloitte, recalls that the initial consultation arrived in 1980 with a bright yellow cover – and quickly become known as the "yellow peril".
Now another Conservative chancellor is trying to make the tax treatment of so-called controlled foreign companies (CFCs) more attractive for multinationals that have relocated outside the UK. The first CFC rules were finalised in 1984 but Dodwell says the big changes took place in 2000 when Gordon Brown toughened up the stance towards "overseas financing companies". These were used by multinationals to raise funds – for instance, to help pay for takeovers – but were based in lower-tax countries.
Brown had already scrapped advance corporation tax (ACT), which had given companies an incentive to book profits in Britain because of the preferential treatment of dividends. Once ACT was abolished, more cash began flowing overseas.
Labour toughened the tax treatment of CFCs in subsequent budgets and now overseas income incurs the headline corporation tax rate – currently 28%. George Osborne's proposals will in effect cut the rate on overseas income to 5.75% by 2014 – by which time he intends corporation tax to have fallen to 23% – as companies will instead pay tax on only a quarter of their overseas earnings. The cost to the Exchequer will be £2.3bn between next year and 2015/16.