Wolseley reckons ‘the interests of its business and its shareholders are best served by establishing an international holding company corporate structure that will help provide more certainty in its taxation position.’ The ‘new’ group will be pretty much identical to the current group – same board, same shareholding, same management, same day-to-day operations, same everything – but it will be incorporated in Jersey and tax resident in Switzerland. All this will apparently cost Wolseley £6m (presumably most of it in tax advisory fees) but presumably it thinks this is small potatoes compares to the amount of money it will save in tax.
We don’t know about you, but this seems pretty ridiculous to us. If the new company is basically identical to the old one, how can it wave a legal magic wand and suddenly move its HQ into a lower tax jurisdiction? Either way, it’s less cash for the corporation tax coffers – which at the moment, is the last thing the Treasury needs. And Business Secretary Vince Cable, who’s been an outspoken critic of tax shenanigans like these in the past, will presumably be outraged.
But the simple fact is – and we can’t stress this strongly enough – that all of this is absolutely, perfectly legal. In fact, the Wolseley board would argue that they’re legally bound to deliver the best possible return for shareholders, so if this saves the group money, then that’s what they ought to do. Like it or not, companies are inevitably going to set up their business in a way that minimises their costs, and that includes tax.
So although we wouldn’t be surprised if this prompts a bit of hand-wringing and condemnation in Whitehall, we can’t help feeling it’s all a bit disingenuous. If you don’t like the fact that the rules allow this kind of thing (and intuitively, it’s hard to see why they should), start working to change the rules – rather than scoring cheap political points by criticising companies for (what is currently) perfectly legitimate behaviour.