Wolseley blames tough British tax regime as it decamps to Switzerland

PLUMBING and heating major Wolseley yesterday swelled the ranks of corporates shifting their tax base abroad, with the group laying the blame at the door of what it says is Britain's punitive tax regime.

• Wolseley operates in more than 20 countries, and owns brands including Plumb Center. Picture: PA

The company, which trades in the UK, the US, Canada and 22 other countries, said it would create a new group holding company, New Wolseley, which will be publicly quoted in the UK, incorporated in Jersey and will have Swiss tax residence.

Chief executive Ian Meakins said the move to Switzerland would slash the group's tax rate from 34 per cent to 28 per cent, and would have saved the company 23 million in the trading year to last July.

It follows decisions by media group WPP and Shire Pharmaceuticals to shift corporate HQ functions to Ireland.

John Martin, Wolseley's chief financial officer, said the firm wanted to avoid tax on overseas income under Britain's contentious Controlled Foreign Companies' (CFC) rules, which apply UK tax on corporates' foreign earnings.

Martin said: "It is 100 per cent the CFC regime in the UK (prompting the move]. It's not very helpful to Wolseley. The principle reason for that is 81 per cent of our revenue is from outside the UK."

The CFC rules are under review by the government, which is consulting blue-chip companies including Rolls-Royce, British American Tobacco and Anglo American on the issue.

Other tax defections from Britain in recent years have included media groups United Business Media and Informa, and insurers Beazley and Hiscox.

Meakins said Wolseley's move was also because it was up against rivals with lower tax costs. He added: "To some extent it is a bit disappointing that we have to go overseas, but we have to maximise value for shareholders."

Meakins said Wolseley would consider a return if conditions changed substantially, but complained of a "lack of visibility" on tax.

It came as Wolseley revealed it had halved pre-tax losses to 328 million in its year to end July compared with 766m in the previous 12 months.

The company - which grew like-for-like sales 4 per cent in the final trading quarter and has seen similar revenue growth since then - said it would resume dividend payments this year as the difficult trading since the 2007 credit crunch showed signs of stabilising.

However, Wolseley said it expected a weak recovery in the UK as public sector cuts, which account for a quarter of its domestic business, bit from this autumn.

Regarding UK economic prospects, Martin said: "We are not in the double-dip (recession] camp but we are not expecting explosive growth or a quick recovery either."

The group made a flat trading profit of 450m, driven by costcutting. Overall revenue fell 9 per cent to 13.2 billion.Wolseley' shares closed down 10p at 1,520p, compared with a 52-week high of 1,742p. Andy Brown, an analyst at broker Panmure Gordon, said: "Share price sentiment remains dependent on US housing news, which is mixed, so we stay cautious."

Wolseley also said John Whybrow would retire as chairman at the firm's annual general meeting, to be succeeded by Gareth Davis.