Wolseley abandons UK for Switzerland to save £23m tax

The UK's penal tax regime came under heavy fire today after plumbing and heating giant Wolseley swelled the ranks of corporate refugees shifting their tax base abroad.

Wolseley's move to Switzerland, which it said would save £23 million based on its latest results, follows decisions by fellow blue-chips WPP and Shire to shift to Ireland.

More than 80% of its revenues are now generated overseas and the firm wants to avoid tax on overseas income under the Controlled Foreign Companies rules, which are under review by the Government.

The Institute of Directors warned: "The Government needs to start serious reform of the tax system in order to make the UK a more attractive place for business. In a global economy you simply cannot beat the numbers. If other countries are cheaper on tax, they win."

Bill Dodwell, head of tax policy at Deloitte, added: "Losing another headquarters overseas is unhelpful to the UK economy because it could mean that jobs are moving outside the UK."

The firm is setting up a holding company called New Wolseley in Jersey, but based in Switzerland for tax purposes. The switch will slash its underlying tax rate from 34% to 28%.

It insists the tax position of its UK arm, which paid £275 million in taxes in 2008 and employs 10,000 people, will remain unchanged.

Chief executive Ian Meakins said the firm was up against rivals with lower tax costs: "To some extent it is a bit disappointing that we have had to go overseas, but we have to maximise value for shareholders."

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

The decision came as Wolseley said it would resume dividend payouts this year as the difficult trading conditions endured since the credit crunch show signs of stabilising. It cut pre-tax losses by more than half to £328 million for the year to July 31, grew like-for-like sales 4% in the final quarter and has seen similar revenue growth since then.

In the UK it expects a "weak recovery" as public sector cuts, which account for 25% of its domestic business, loom.

Finance director John Martin said: "We are not in the double dip camp but we are not expecting explosive growth or a quick recovery either."