An Aon spokesman said the relocation was designed to bring
the company closer to its clients and was not based on tax
But the UK’s favourable territorial tax regime
is thought to have been a key consideration in the
board’s decision to move across the pond.
filings distributed to Aon’s shareholders on
Friday, said the company expects to drive significant value to
shareholders under a UK territorial tax system by "increasing
future cash flows through a significant reduction in our global
effective tax rate, due primarily to changes in the
geographical distribution of income."
While the UK levies corporate tax on a company's worldwide
income, it will generally provide tax exemptions for dividends
and gains derived from non-UK trading subsidiaries.
Daniel Friel, of Latham and Watkins, said the result of this
is that dividends from non-UK subsidiaries will only be taxed
in the jurisdiction where the subsidiary is based.
"Profits of a US trading subsidiary will probably suffer US
tax, but no further UK taxes when those profits are received in
the UK as a dividend" said Friel.
The move - which will only involve about 20 employees from the
company's leadership team - is expected to take place
later this year, following a shareholder vote in May.
UK chancellor George Osborne has
continually spoken about his intention to make the UK an
attractive destination for multinationals.
Osborne announced a complete overhaul of the CFC regime in
the last budget to make it easier for companies to exempt
And this move, coupled with the pledge to reduce the
corporate tax rate to 23% by 2014, could be having the desired
effect, in light of Aon’s announcement.
Friel said that while the primary reason for
Aon’s move is probably to reflect where the
business is actually generated and where the capital is
located, it is clear the UK’s increasingly
attractive tax regime had a part to play.
"There seems no doubt that a whole range of tax rules in the
UK and the US have made the move easier than it otherwise would
have been," said Friel.
"I think what Osborne has done rather gradually is to remove
uncertainty surrounding the UK CFC rules without ultimately
changing the rules in a material way for most companies."
Peter Cussons, of PwC, said that while Aon claim its
proposed move is not tax related, tax must have been a factor,
because it is such a big global player in the insurance
"This is great news for the UK," said Cussons. "When you
look at the combination of favourable measures the UK has in
place, there are obvious reasons Aon has chosen to come
Cussons highlighted capital gains exemption, dividend
exemption, the impending CFC reform, and optional foreign
branch exemption as factors which will have drawn Aon to
In the case of Aon, the UK also benefits from
London’s status as a leading global centre for
insurance and financial innovation.
Nicholas DeNovio, a Chicago-based tax lawyer with Latham and
Watkins, said the US anti-inversion tax law, enacted in 2004,
prevents US companies from expatriating unless they have
substantial business activities in the jurisdiction to which
"A US-based company seeking to move its headquarters and
parent company structure is generally limited to selecting a
jurisdiction in which it has substantial business activities,"
This appears to make London the preferred destination for any
US insurance giants wishing to relocate to Europe.
Financial secretary to the Treasury, Mark Hoban, said:
"Aon’s decision is a strong endorsement of London
and the UK.
"The UK continues to be one of the leading global centres
for insurance, providing firms with the right environment to
drive long-term growth, identify opportunities in emerging
markets and utilise British expertise in risk management."