One of Britain’s largest drugs companies is to move its headquarters to Dublin in an effort to limit its tax bills. Accountants say that this could be just the beginning of a spate of similar moves by other UK multinationals.

Shire, the UK’s third-biggest pharmaceutical company, will incorporate its new holding company in Jersey and hold all board meetings in Dublin. Its operations and 300 staff will remain in Basingstoke, Hampshire.

The move is understood to be a result of disquiet about a possible government crackdown on profits from offshore subsidiaries. Most UK companies do not pay corporation tax on offshore profits that are kept overseas unless the foreign subsidiary is deemed to have been set up to avoid tax. However, all firms must pay corporation tax of 28 per cent on all profits brought into the UK, “topping up” any lesser tax already paid in another country to the UK level.

The Government is reviewing this top-up policy, but it is feared that it may also widen the scope of antiavoidance measures, making new rules ultimately more onerous than the present ones.

Accountants also say that many firms have grown tired of waiting for the outcome of a consultation that began more than two years ago.

Chris Sanger, head of tax policy for Ernst & Young, the accountancy firm, said: “By delaying the new rules, the Government are exposing themselves to the risk that companies will take action. Quite a few other multi-national companies with overseas activities are quite far down the road of seeking alternative tax headquarters so they can be sure of the tax charges they face.

“Inertia has kept them here, but in today’s economic climate they are looking at all their expenses - including tax.”

The Irish Republic’s corporation tax rate of 12.5 per cent is less than half that of the UK. Shire, a FTSE 100 company that is worth more than £5 billion, will continue to pay UK corporation tax on UK profits, as well as UK national insurance and VAT.

The CBI expressed alarm that other firms could take similar action. Richard Lambert, the Director-General of the CBI, told an audience: “We are particularly worried that an uncompetitive corporate tax system is spoiling the UK’s attractiveness as a place to do business, and that other internationally mobile firms will follow Shire’s path.” Mr Lambert added: “Readings on the UK’s entrepreneurial barometer have dipped sharply over the past 12 months.”

Vince Cable, the Liberal Democrat Treasury spokesman, said: “The Government can’t afford to dither. It doesn’t seem to be aware of the tax competition issues.”

However, the Treasury maintained that Britain still had one of the most competitive tax regimes in Europe. A Treasury spokesman said: “We have the lowest headline rate of corporation tax in the G7, and tax is only one factor which makes us the best place to do business. We have a highly skilled workforce and first-rate infrastructure.”

Adam Bainbridge, the head of corporate tax for KPMG, said: “It would be better for the Government to go back and look at the underlying problem here, which is the competitiveness of the UK tax system as a whole.”

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