A key part of Sir Richard Branson's Virgin empire is to move offshore in a switch that should avoid millions of pounds in UK taxes.
Virgin Enterprises, which sells the rights to the Virgin brand, will relocate from London to Geneva in a blow to the chancellor, George Osborne, who has previously cheered companies moving back to Britain.
The division had revenues of £32.4m in the year to March 2010, according to documents filed with Companies House, booking profits of £23.4m and a total tax liability, including international taxes, of £10.1m – although that figure included a £4m UK tax credit. However, the most recent accounts show that the company had also accrued a bill to the Treasury of £26.9m in corporation tax, a number that accountants said was unusually high considering the company's turnover.
A spokesman for Virgin said the accrued taxes will be offset by losses from other companies in the Virgin Group.
Richard Murphy from Tax Research said: "I didn't think Virgin paid any tax here, let's be blunt about it. It's been remarkably poor at doing so."
Vince Cable, the business secretary who was critical of Branson's tax status while he was in opposition, declined to comment.
Virgin insisted that it has no plans to move its other ventures – including Virgin Atlantic, Virgin Trains and Virgin Money – offshore and that its existing UK businesses would continue to pay tax in Britain. A spokesman said: "We often have joint ventures. The way we structure businesses depends on the locality of where the brand operates." In total, Virgin says it has revenues of around £13bn, of which £10bn are derived from the UK.
Despite its low revenues, Virgin Enterprises is planning to expand internationally by targeting emerging markets such as Asia and Latin America in sectors including mobile phones and leisure. Insiders said that the move to Switzerland would make Virgin Enterprises "more competitive".
Switzerland has been aggressively targeting British companies by claiming that its tax rates are move attractive and last year it emerged that Kraft was moving key parts of its newly acquired Cadbury business to Switzerland.
Companies domiciled in Switzerland pay a federal rate of tax plus one levied by the canton, which is often unique to each business following negotiations with local officials. Virgin insisted that it is too early to say what its new tax rate will be.