Why Silicon Roundabout can’t compete with Ireland tax incentive

Twitter, Silicon Valley’s micro-blogging website, is to open an international headquarters in Dublin. They have joined other high profile US tech companies including Facebook, Google, LinkedIn and eBay.

Last year, The Sunday Telegraph reported that Twitter executives met property agents in London and visited locations in the West End and ‘Silicon Roundabout’.

The IDA (Ireland's Foreign Investment Development Agency) is trying to make Dublin the social media and online capital of Europe. Google set up it's international HQ in Dublin in 2004 with 200 members of staff. It is now one of Dublin's biggest employers with 2,200 people working for it, including developers and sales support staff.

Foreign companies are attracted to Ireland by its 12.5% rate of corporation tax, one of the lowest in Europe. From April 2011, the UK’s corporation tax rate is more than double at 26%.

Even more attractive is 'transfer pricing', a tax law which allows large multinationals to legally divert profits out of subsidiary companies and into tax havens such as Bermuda, which has no corporate tax rate. 

The result, for every £1 million in taxable profits, Twitter’s Irish subsidiary could pay just £125,000 in corporation tax, or even less with clever tax planning. In contrast, £260,000 if the company was to be based in London.

Back in the UK, the main rate of corporation tax is reducing a further 1% each year until it reaches 23% in 2014. The UK also has generous allowances for qualifying Research and Development at 175% of expenditure.

Created in 2006, Twitter's text-based posts of up to 140 characters attract more than 400 million users every month, with an average of 230 million tweets fired off daily. Much of Twitter’s revenue is generated through sponsored tweets.

Jeffreys Henry LLP is a leading firm of Chartered Accountants based just off ‘Silicon Roundabout’ with extensive knowledge of the creative, digital and technology sectors.