The Treasury is delaying proposed changes to the taxation of foreign profits after an outcry from British multinationals, The Times has learnt.

Officials say that legislation may now not be enacted before 2010, the year by which Gordon Brown must call a general election.

The delay comes after decisions by several companies, including United Business Media and Shire, to move their tax domicile offshore. Many others, including GlaxoSmithKline and WPP, have also threatened to move to more tax-friendly countries.

Some multinational companies are also considering the more serious step of moving their headquarters out of the UK, according to David Childs, head of Clifford Chance, the world’s biggest law firm. “We know that a number of UK multinationals are thinking of leaving the country — moving their headquarters out with their tax base,” Mr Childs said in an interview with The Times.

Many business leaders have been alarmed by tax changes proposed by the Government in recent months, including those relating to non-domiciled foreigners, capital gains tax, and multinational companies.

The head of one large British company that is considering moving its tax domicile offshore said that even if the Government dropped its foreign tax proposal completely, the damage had been done. “People have lost all confidence in the tax regime and there will be a flood of companies leaving.”

Alistair Darling, the Chancellor, was due to issue a consultation document with controversial proposals for the taxation of profits in multinational companies by the end of July.

However, one person close to the Treasury said: “It’s obviously now not going to happen under the original timeframe. The consultation period is certainly now going to be delayed.”

The delay postpones one headache for Mr Brown, who is still reeling from the climbdown over the abolition of the 10p tax rate and now faces a revolt over detention of terror suspects.

The proposals, first mooted in July last year, call for the abolition of taxation on foreign dividends, but experts said it was clear that the Treasury planned a much more thorough sweep of all foreign profits than in the past.

Insiders say that the Treasury believes that chief executives’ fears are unfounded but has decided to take more time to consult before introducing the changes. By postponing the deadline, it is unlikely that the Treasury will be able to push through legislation in 2009, as originally planned. Tax experts said the delay would be welcome. John Whiting, of PricewaterhouseCoopers, said: “This is such a complex area with such far-reaching implications affecting so many businesses that we need to do it right.”

Mr Childs said that tax changes were undermining the attractiveness of doing business in the UK. “We have known for a while that quality of life, transport and infrastructure have all been negatives. In the past we have not worried about tax being a disincentive. Now the real worry is that government may make tax a disincentive.”

The concerns are reinforced by a study by the Association of Chartered Certified Accountants, which found that the UK’s tax system was viewed as less fair and less transparent than other tax regimes around the world.