Ethical Performance
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Henderson risks criticism over tax move to Ireland

November 2008

One of the UK’s leading asset management companies is changing its tax domicile from Britain to the Irish Republic to save money, even though it has warned other companies to take a more socially responsible attitude to tax-paying.

The switch, which has been approved by Henderson shareholders and was expected to take effect at the end of last month, is to take advantage of Ireland’s lower corporate tax rate – 20 per cent compared with the UK’s 28 per cent.

Other British companies, including Shire Pharmaceuticals, WPP, and United Business Media, have recently made similar moves to make Ireland their tax base, judging that any adverse publicity will be outweighed by financial gains.

However, Henderson is in a slightly different position because it has previously raised tax status as a corporate responsibility matter. In 2005 the fund manager issued responsible tax guidelines for companies which said businesses should make an explicit public commitment to respect the spirit of tax law. It argued there was ‘an important component of public expectation regarding CSR and tax’, and stated that companies ‘may be particularly vulnerable to public criticism if they are perceived as not making an appropriate contribution’ to tax revenue in the countries where they operate.

For a period it also engaged with companies on the matter.

The Responsible Tax document suggested that when companies change their tax status they should ask themselves: ‘Is this, or might it appear to be, unduly complex and contrived? If it is highly complex, and/or might be perceived as having no purpose other than to reduce tax, are we comfortable that we can explain its rationale to tax authorities and others?’

However, Henderson said last month: ‘For historical reasons, [our] parent company has been tax-resident in the UK. As its business becomes increasingly global, [we have] concluded that it... would be better served by having an international holding company and a group structure that is designed to help protect Henderson group’s taxation position and better facilitate Henderson group’s financial management.’ The parent company is incorporated in Jersey and will be tax-resident in Ireland, but will continue its dual listing in London and Sydney.

Henderson, which runs a number of well-known SRI funds, including the Global Care Growth Fund, told EP: ‘We will continue to pay full UK tax on business derived in the UK but have a responsibility to our shareholders to manage the business as efficiently as possible.’

A senior investment figure in the City told EP the move had raised eyebrows. ‘I would expect the board of Henderson to reflect on [its] good work on responsible tax principles and to take this into account when considering what they should pay in Ireland. There are broad reputational issues that need to be well managed when making these kind of decisions.’

More than one in four of Britain’s biggest companies pay no UK corporation tax, according to the House of Commons public accounts committee.

Henderson | UK & NI Ireland | Tax

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