This is what happens when the UK taxman gets too greedy and tries to tax more offshore subsidiaries under the CFC rules. The group flips its structure and holds all of its subs under a new holding company in Ireland, out of the hands of the UK tax man.
WPP Group said it intends to create a new Ireland-based parent entity in a bid to prevent its annual tax payments from increasing potentially by tens of millions of dollars under proposed changes in U.K. tax laws.
Separately, the company said TNS shareholders representing almost 43 percent of outstanding shares now favor the takeover of the research firm by WPP and will tender their shares accordingly.
The new tally is up 9 percent from the 34 percent of shareholders who indicated they would accept the WPP bid last Friday when WPP extended the deadline to accept its $2.2 billion acquisition offer until Oct. 3.
London-based WPP said the planned relocation to Ireland comes in response to "possible changes to the U.K.'s taxation of foreign profits," which could result in a significantly higher annual tax bill. Under the proposed changes, profits derived from off-shore operations would likely increase. Currently, less than 15 percent of the company's profits are from British-based operations, WPP said.
The new "scheme," WPP said "should provide the opportunity to reduce the overall tax rate of the group in the short to medium term." The plan must be approved by WPP investors who will vote on the proposal in late October, as well as by the British High Court, which has scheduled a hearing on the matter for Nov. 18.
The company said the move would have no impact on day-to-day operations or involve any changes in management or the corporate board.