Shire plans tax move to Ireland
pharmafile | April 17, 2008 | News story | Sales and Marketing |Â Â Â
One of the UK's leading pharmaceutical companies is to shift its tax base to the Republic of Ireland to benefit from a more favourable rate of corporation tax.
Shire said its business and shareholders would benefit from the move to the Republic, where tax rates are less than half those in the UK.
The move has attracted a great deal of media attention, and has been heralded as a potential beginning of a tax exodus from the UK.
The company will open a new office in Dublin, where its board of directors will meet once the change in tax status is finalised, but its headquarters will remain in Basingstoke, Hampshire.
The company said there would be no job losses or relocation of existing staff from the UK and the way its business is run will not change as a result of the decision.
Shire said the shift reflected the transformation of its business over the last ten years "from a primarily UK business to an international business, with the vast majority of its revenues generated from outside the UK."
It added: "Shire has concluded that its business and its shareholders would be better served by having an international holding company with a group structure that is designed to help protect the group's taxation position, and better facilitate the group's financial management."
Shire has applied to the High Court to set up in a new holding company that would be incorporated in Jersey and resident for tax purposes in the Republic of Ireland, where it will be subject to a corporate tax rate of 12.5% rather than the UK's 28%.
Shire paid £8.8m in UK taxes in 2006, of which £4.2m was corporation tax, meaning the UK tax revenue from the company will be halved by the move.
The new holding company, Shire Limited, will be led by the existing board and management team and its shares will be listed on the London Stock Exchange by the end of May, subject to shareholder approval.
Founded in 1986, Shire is a speciality pharma company that focuses on attention deficit and hyperactivity disorder (ADHD), gastrointestinal treatments, renal diseases and human genetic therapies.
Its leading products are the ADHD treatment Adderall XR, ulcerative proctitis therapy Pentasa, Fosrenol for hyperphosphataemia in chronic renal failure patients, Replagal in Fabry Disease and the Hunter syndrome treatment Elaprase.
The pharma firm is the latest company to flee the UK's corporate tax regime in favour of a more attractive business environment.
Last month internet company Yahoo decided to shift its European headquarters from London to Switzerland, citing a desire to increase its competitiveness.
Such moves increase pressure on the government to make its tax regime more competitive in order to keep big businesses in the UK – though the government argues it sets the lowest rate of corporate tax in the G7 group of industrialised countries.
Commenting on Shire's decision the CBI said it added to its existing concerns about the UK's corporate tax system.
"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," CBI director general Richard Lambert told The Guardian.
A recent survey by accountancy firm KPMG blamed complex rules and too much legislation for placing Britain in the bottom half of a league table of the most attractive places to do business in Europe.
Cyprus, Ireland and Switzerland came out top in the survey for their combination of clear rules, low tax rates and stable fiscal laws, meanwhile Britain came 12th out of 22 countries in terms of the attractiveness of tax regimes.
