Publishing firm Informa blames budget for Swiss tax switch

Publishing and conference group Informa has become the first company to react to tax changes announced in the budget by moving its tax domicile out of the UK to Switzerland to escape "double taxation".

The decision deals a fresh blow to Alistair Darling, who has come under fire for increasing the top rate of income tax to 50%, sparking concerns that there would be an exodus of entrepreneurs and businesses.

Informa also unveiled a two-for-five rights issue to raise £242m in an attempt to reduce its debt to £900m by year-end, amid a warning from its chief executive Peter Rigby, who said of the economy: "We really don't see many green shoots."

Informa, the publisher of titles including Lloyd's List and Routledge academic books, said this morning that it would create a new parent company that will be listed in the UK, incorporated in Jersey and tax resident in Switzerland.

The firm cited changes to the taxation of foreign profits announced in last week's budget and due to come into effect at the start of July, relating to intellectual property rights such as patents, copyrights and trademarks. With 80% of its earnings coming from overseas, it believes it would end up being taxed twice – once abroad and again in Britain.

Under the new tax rules, the dividends companies receive from their overseas subsidiaries relating to "real" economic activity involving trade in goods and services will not be taxed by the UK authorities. But income derived from intellectual property rights does not fall in this category and will be taxed by HM Revenue & Customs (HMRC).

Rigby said the group acted because the new rules were likely to have a "material detrimental" impact on Informa's tax position. "There hasn't been that certainty within the current environment and we believe taking this step gives us that certainty over the tax rate."

Informa, which employs 9,000 staff in more than 40 countries, said moving its tax base to Switzerland would enable it to keep its tax rate at 26-27%. Without the move, its tax rate would go up to 30-31%. The amount of tax it pays in the UK will thus remain at around £50m a year, Rigby said.

Adam Walker, the finance director, said the step was necessary for the company to stay competitive. "This decision will have no impact on the UK economy. This is a decision for Informa. The vast proportion of our profits are generated abroad," he added.

"This is part of an ongoing battle between some companies and the Revenue," commented Richard Murphy, a tax expert. Companies like Informa are "very good at locating their intellectual property rights in low-tax countries," attracting HMRC's attention, he said.

He added: "Companies that have a lot of intellectual property in their subsidiaries or make a lot of income from intellectual property are being challenged by the Revenue under the new rules. The revenues are, in the Revenue's view, largely artificial."

Other companies have already moved their tax domicile out of Britain to countries with a more favourable tax regime such as Ireland. The list includes advertising giant WPP, drugs group Shire, publishing company United Business Media, rented office group Regus, financial groups Henderson, Brit Insurance and Hiscox, and engineering firm Charter.

Some businesses have also launched legal challenges to the UK's tax regime, with Cadbury and Vodafone both winning significant legal battles against HMRC.

But Murphy said the new tax rules were beneficial to most UK companies and would help stem the exodus.

"The vast majority of companies which undertake real trade with real people will benefit from the new rules," he said. "It will simplify their affairs with the Revenue. I do not expect there to be a significant exodus from the UK."

Murphy also believes that despite talk of a "brain drain" from Britain – with Virgin tycoon Richard Branson saying the 50% top rate of income tax was a "block to the next wave of entrepreneurs" – many business leaders will stay put.

"Every time there is a threat to the rich that they will be taxed a little bit more, we have no evidence that they've actually left," Murphy said. "You are in the UK economy because it's a great place to make money. It's also quite a cool place to live."

Informa is the largest listed organiser of conferences and courses in the world and responsible for more than 2,500 subscription-based publications.

Shares in the company had risen by 14% to 339.5p by this afternoon.