The government has published a consultation, 'Corporate Re-domiciliation', it explores whether it needs to intervene to make it easier for foreign-incorporated companies to change their place of incorporation if they wish to relocate to the UK.

The government is keen to understand the demand and perceived benefits of a regime that will make it administratively easier for companies to move to the UK, bringing increased investment and skilled jobs.

It is not possible, under existing legislation, for a foreign-incorporated company to become UK-incorporated and retain its legal identity. Workarounds include transferring assets to a new or existing UK incorporated company or selling its shares to a new UK holding company. These can be complex and costly exercises, with unwanted tax consequences or liabilities.

The proposals include:

  • Re-domiciled companies will be subject to the same rules and standards as UK-incorporated companies. Regulated activities will fall under the authority of UK regulators.
  • There will be no economic substance test as there is no such requirement for domestic companies.
  • There will be eligibility criteria including:
    • The company's current country of domicile must allow such a transfer and its criteria met.
    • The entity must be a UK compatible corporate entity.
    • The move must not pose a security risk and not be contrary to the public interest.
    • The company must be solvent.
  • Many countries allowing inward re-domiciliation (as proposed) also allow outward re-domiciliation (allowing companies to move their incorporation away from the UK which is currently not possible). Views are sought on whether this would be desirable.

Tax considerations include:

  • Corporate residency; whether the act of re-domiciliation would provide UK tax residency or whether UK central management and control would also be required.
  • How to restrict the importation of overseas Losses that could be offset against UK profits.
  • Whether capital assets would be brought into the UK at market value for Capital Gains Tax and the Corporate Intangibles Regime, in a similar manner as previously existed for EU migrations.
  • What anti-avoidance measures, if any, would be required for:
    • The personal tax liabilities of individual shareholders?
    • Stamp duties due on shares and securities?
    • Place of establishment rules for VAT-able supplies?

Responses can be submitted online to HMRC at  or via email using the following addresses:

  • This email address is being protected from spambots. You need JavaScript enabled to view it. for responses to the questions in Chapters 1 - 4
  • This email address is being protected from spambots. You need JavaScript enabled to view it. for responses to the tax technical issues in Chapter 5.

The consultation ends on 7 January 2022.

Consultation questions

Chapters 1 - 4

1. What do you see as the advantages of re-domiciliation compared to existing routes to relocate a company to the UK, and how material are they?

2. From what types of companies, and from which sectors, is there likely to be the most demand for re-domiciliation to the UK, and why?

3. What level of demand might the UK see from firms seeking to re-domicile?

4. From what jurisdictions would companies be most likely to re-domicile to the UK?

5. Are there aspects to other jurisdictions’ re-domiciliation regimes which the UK should seek to replicate or avoid?

6. What evidence is there that supports the economic benefits of countries permitting re-domiciliation?

7. Are there other administrative, financial or other barriers that would still prevent a company from re-domiciling to the UK even with a re-domiciliation regime being established?

8. What should the government consider to ensure firms in regulated industries can re-domicile to the UK?

9. Do you have any wider concerns about a re-domiciliation regime that the Government should be aware of?

10. The government’s view is that an economic substance test is not necessary for re-domiciliation. Do you agree?

11. Are there factors that would influence your choice of place of incorporation within the UK?

12. Will the existing arrangements that do not allow companies to move between certain UK nations have a bearing on overseas companies’ decisions whether to redomicile in the UK?

13. Do you have any views on how the regime should best ensure departing country conditions are met? Is there anything else we should consider?

14. Do you have views on our proposed approach, which would allow all bodies corporate to re-domicile to the UK, subject to the relevant entry criteria?

15. Should we preclude directors who do not have a good standing (i.e. pending court cases) from re-domiciling to the UK? If so, is confirmation from the departing jurisdiction’s competent authority the best way of assessing this?  

16. Do you have any views on our good faith criteria?

17. Should it be necessary for firms to have completed a reporting period to redomicile? What other reporting information should be provided to the Registrar or should it be able to request and is the requirement of the audited account sufficient and proportionate?

18. Are the proposed solvency requirements sufficient and proportionate? If not, what would you recommend?

19. The government is not minded to prescribe a minimum turnover/size of companies that can re-domicile. Do you agree?

20. Are there any other entry criteria we should consider?

21. What measures ought to be adopted to ensure re-domiciliation is not used to harm creditors in other jurisdictions?

22. Are there further safeguards required to prevent exploitation of UK rules, which may be more flexible and business-friendly than some foreign regimes?

23. The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill makes provision for the disqualification of directors in companies that are dissolved without becoming insolvent. Is this measure sufficient for UK authorities to investigate directors of companies that have re-domiciled?

24. Given investigations may be necessary what bilateral arrangements may be required with exporting jurisdictions?

25. Are there any other matters relating to insolvency that would have implications for a UK re-domiciliation regime?

26. Do you agree that existing protections and sanctions against director misconduct provide sufficient protection for the UK’s re-domiciliation regime?

27. Do you have views, including evidence from other jurisdictions, to inform how the Registrar could seek assurance over the standing of the company before approving re-domiciliation, in order to safeguard the UK’s business environment?

28. Do you agree that Companies House should have the ability to refuse an application or petition for the winding up of companies in the circumstances as set out above?

29. Would you be in favour of the UK introducing an outward re-domiciliation regime? 

30. What do you see as the economic or other benefits to the UK of allowing outward re-domiciliation?

31. What is your view of the economic or other risks to the UK of allowing outward re-domiciliation?

32. In your view, is there a demand for outward re-domiciliation from current UK incorporated firms? If so, which jurisdictions would they likely seek to redomicile to, and why?

33. What types of companies, and in what sectors, is there likely to be the most demand for re-domiciliation out of the UK, and why?

34. Are there other administrative, financial, or other barriers that would still prevent a company from re-domiciling out of the UK even with an outward re-domiciliation regime being established?

35. What is your view on these potential conditions for outward re-domiciliation? Are there other conditions you think that the Government should require to minimise the economic risks to the UK?

36. If the Government were are to place a time limit on being domiciled outside of the UK before being allowed to return what would be the positives and negatives in your view? If appropriate to set a time limit, how long should this be for?

Chapter 5: tax technical issues

37. Is clarification required as to whether a company will become or cease to be UK resident following a re-domiciliation to or from the UK?

38. Which of the above options would be preferable and why?

39. Are there are any other options that should be considered?

40. Do you have any views on how material this risk is, and what additional protections might be introduced to prevent such loss importation?

41. Do you have any views on this?

42. Do you have any views on the impact of the proposals for a re-domiciliation regime on personal taxation?

43. Do you have any views on the impact of the proposals for a re-domiciliation regime on STS?

44. Do you have any views on the impact of the proposals for a re-domiciliation regime on VAT?

45. Do you have any views on any other tax consequences of a company redomiciling in or out of the UK and whether any other amendments to UK tax law should be considered?

Useful guides on this topic

Companies: permanent establishment and residence
What are the rules for determining a company's country of residence? What is central management and control? When does a company create a permanent establishment in another country?

External link

Open consultation: Corporate Re-domiciliation


Small acorn
If you like our content come and join us.

Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.

Register with us now to receive our unique FREE Tax Planning Tips and Advice Guide & our FREE OMB Newsletter.

 

Comments (0)

Rated 0 out of 5 based on 0 voters
There are no comments posted here yet

Leave your comments

  1. Posting comment as a guest.
Rate this post:
Attachments (0 / 3)
Share Your Location

 

Enjoying the Practical Tax content on www.rossmartin.co.uk? 

Sign up now to receive a unique FREE Tax Planning Tips and Advice Guide & our FREE Newsletter.

.Squirrel ad