Alistair Darling on Monday sought to stem the tide of businesses leaving the UK by giving in to business demands for an exemption of their foreign profits from UK taxation.

In a historic change in the corporate tax system, the government will allow multinationals to repatriate foreign dividends tax-free from next April, while postponing controversial anti-avoidance measures for more consultation. It set out its “direction of travel” on anti-avoidance rules on Monday, saying it did not intend to tax profits genuinely earned in Britain.