Wolseley, the world's largest plumbing and heating products supplier, plans to move its tax status to Switzerland, becoming the latest in a growing number of firms to exit their UK base in search of tax savings.
The group, which trades in the UK, the United States and Canada and 22 other countries, said today it would create a new group holding company, New Wolseley, that will be UK listed, incorporated in Jersey and will have Swiss tax residence.
"Our underlying tax rate has now moved up to 34 per cent. By redomiciling to Switzerland that tax rate will come down to about 28 per cent," chief executive Ian Meakins told reporters after Wolseley announced the move, which is subject to shareholder approval, along with full-year results.
Chief financial officer John Martin said if Wolseley was already domiciled in Switzerland it would have saved £23 million in the year to July 31st.
British business media group Informa shifted its tax base to Switzerland earlier this year, while insurance firm Beazley, advertising group WPP, drugmaker Shire and media group UBM have all moved their tax domicile to Ireland in recent years.
Mr Martin blamed Britain's controlled foreign companies (CFC) tax regime, which applies UK tax on overseas earnings, for the decision to switch.
"It is 100 per cent the CFC regime in the UK. It's not very helpful to Wolseley. The principle reason for that is 81 per cent of our revenue is from outside the UK," he said.
Shares in Wolseley were down 0.9 per cent at 1516 pence at 0820 GMT as concern over the firm's trading outlook offset the proposed change in tax status.
"Share price sentiment remains dependent on US housing news, which is mixed, so we stay cautious," said Panmure Gordon analyst Andy Brown.
Wolseley made flat trading profit of £450 million in the 2009-10 year, driven by cost cutting. Revenue fell 9 per cent to £13.2 billion.
Wolseley said revenue growth in the early part of its new financial year was similar to the 4 per cent like-for-like growth seen in the fourth quarter.
It said that although it was cautious about the outlook for its markets it was confident the group would make further progress this year and intended to resume dividends at the half year results.
Wolseley added that John Whybrow will retire as chairman at the firm's next annual shareholders meeting and be succeeded by Gareth Davis.
Reuters