Wolseley, the UK quoted builders merchant, is to move its place of incorporation to Jersey and tax residence to Switzerland according to the BBC this morning.
Not that it is actually a big deal. First, it’s a loss making company. Second, it’s been shedding UK business. Third, the tax impact is therefore small.
But the message is none the less that tax cheating is acceptable: no one on earth can think this structure anything but artificial. And that alone means that this, and other such moves, says the time to act on corporate residence has arrived. The non-sensical UK approach that the location of board meetings determines the residence of a company is an anachronism from the age of the steam ship and telegrams. It is in urgent and obvious need of updating so that corporate residence reflects economic reality — not a silly game that boards of directors can play.
The change that is very obviously needed is that a company must be considered resident where the economic substance of its management is located. And yes, that can be determined. It’s where a majority of the board and their senior management team work day in day out.