Gordon Brown and David Cameron went head-to-head yesterday to try to woo business over their plans for corporation tax as evidence emerged that more companies were considering leaving the UK because of its complex tax regime.

The Prime Minister, addressing the annual conference of the Institute of Directors (IoD), held out the prospect of a cut in corporation tax as he offered a “commitment that when possible we will cut tax”.

His comments came a day after Alistair Darling, the Chancellor, announced a tax task force aimed at keeping Britain’s tax environment competitive. Mr Darling’s initiative in turn followed news that WPP, the British media group, was considering moving its tax domicile to the Republic of Ireland because of the Government’s proposals on the taxation of foreign profits

Speaking at the same conference at the Albert Hall in London, the Conservative leader said that the Government’s response “of yet another review” was not good enough.

“Instead they should — immediately — stop the rise in small business taxes and in taxes on entrepreneurs that they are driving through Parliament as we speak. And they should implement our fully costed plan to cut the main rate of corporation tax rate to 25 pence,” Mr Cameron said.

Already, United Business Media, another British media group, has said that it plans to relocate its tax base to Ireland. Shire, the British drugs company, has said that it is considering a similar move. Others, including Experian, Hiscox, Invesco, Omega and Shell, have all decided to change their tax jurisdiction.

Sir Martin Sorrell, WPP’s founder and chief executive, said yesterday that yet more companies were thinking of following suit. “I’m aware of a significant number who are doing just that,” he told The Times.

This week, George Osborne, the Shadow Chancellor, sought to curry favour with business by arguing that there was a powerful case for a £700 million exemption of companies’ foreign profits from British taxation.

Mr Cameron said yesterday that his party was working with PricewaterhouseCoopers and Grant Thornton, the accountants, on what he called a clear programme of business tax simplification, which sources said included Mr Osborne’s foreign profits plan.

Although Britain’s corporation tax rate is one of the lowest in Europe, the Government has sent jitters through the business community with its proposals to tax the worldwide “passive income” of British-based multinationals. That is on top of changes to capital gains tax already announced and a clampdown on foreigners working in the UK.

Mr Brown admitted yesterday that communication with business over recent tax changes had been unsatisfactory. He said: “The dialogue, I agree, could be better and it will be better.”

A spokesman for the Treasury said last night that the Government planned to report back on its review of the taxation of foreign profits before the summer recess. He added that the issue would also be included as part of the tax task force’s agenda.

Mr Brown offered his tax lifeline as the IoD published a survey showing that 49 per cent of business leaders think that Britain is less competitive than it was ten years ago; 33 per cent said that it was more competitive.

The business leaders called for action on regulation, tax and education to improve Britain’s standing.

Explore Money

• Property & Mortgages

• Savings

• Borrowing

• Investment

• Funds

• Insurance

• Consumer Affairs

• Tax

• Pensions

• Broadband