UK and International Tax news

Corporate Re-domiciliation Consultation

Friday 22nd April 2022

The UK Government has recently issued an update to its consultation launched in October last year on corporate re-domiciliation.

On 27 October 2021, the UK Government launched a public consultation on the introduction of a UK corporate re-domiciliation regime. This consultation closed on 7 January 2022.

Re-domiciliation would enable a foreign incorporated company to change its place of incorporation whilst maintaining its legal identity as a corporate body. This would give companies maximum continuity over business operations when redomiciling and substantially reduce administrative complexity compared to other routes of relocating and incorporating in the UK.

The Government intends to introduce such a regime and make it possible for companies to move their domicile and relocate to the UK by enabling the re-domiciliation of companies. This would modernise the UK’s legal framework and bring the UK in line with international peers, including Canada, Singapore, New Zealand and a number of US states.

The consultation set out the principles for introducing a UK re-domiciliation regime and invited views on particular aspects including:

  • The advantages of enabling companies to re-domicile
  • The level of demand that exists, among which types of companies and sectors
  • The appropriate checks and entry criteria
  • The merits, benefits and risks of establishing an outward re-domiciliation regime
  • Any tax implications associated with the introduction of a re-domiciliation regime

Consultees were asked to respond to a total of 45 questions and, in general, gave broad support to the government’s proposal to introduce a corporate re-domiciliation regime. However, many respondents noted that a regime in itself would not be enough to attract overseas companies to the UK.  The wider business environment, both in the UK and internationally, is likely to be the main driver for attracting overseas companies to re-domicile to the UK.

Respondents agreed that a regime should be flexible but emphasised the need to balance simplicity of design with sufficient rigour and appropriate checks. More generally, respondents sought clarity around the process and how the regime would work in practice. Predictability and certainty were highlighted as desirable characteristics of any UK regime.

The majority of respondents supported a two-way regime, permitting both inward and outward re-domiciliation. Some highlighted the principles of reciprocity which might prevent an outgoing jurisdiction permitting re-domiciliation to the UK if the UK did not conversely allow its own companies to re-domicile overseas.

There was a variety of views as to whether the existing arrangements, which prevent UK companies from transferring their place of incorporation between nations, would have an impact on overseas companies’ decisions to re-domicile to the UK.

Most respondents agreed that intra-UK re-domiciliation was not likely to have a significant impact on a company’s decision to re-domicile, but some considered this approach to be inconsistent with the proposal to allow overseas companies a choice of where to incorporate within the UK.

There was general support for re-domiciled companies to be treated the same as UK incorporated companies for tax purposes. Respondents want a UK re-domiciliation regime that is simple and consistent with existing tax regimes but did not favour a new category or distinct tax treatment for re-domiciled businesses. Respondents agreed that more detail was needed on the tax implications of re-domiciling to and from the UK.

In particular, respondents raised points on company residence for tax purposes, loss importation, capital gains and intangible asset base cost, stamp taxes on shares and securities, VAT, branch exemption elections for overseas permanent establishments, treatment of bad and doubtful debts and other assets, and capital allowances.

Respondents agreed there were also implications for personal tax and the indirect impacts of a UK re-domiciliation regime. Most agreed that the attraction of a UK re-domiciliation regime will be significantly influenced by the tax rates in the UK compared to other jurisdictions with re-domiciliation regimes.

As the consultation is in the early stages of the policy development process, BEIS in partnership with HM Treasury and HMRC will continue to refine policy and engage as publicly as appropriate. Points raised by respondents will be considered carefully as the development of these proposals continues.

If you would like to further detail on the consultation, please contact Keith Rushen on 0044 207 4862378.

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