Press Room

21 Feb 2022

Re-domiciliation Consultation Document


Senior Manager Helen Siqin examines the UK government’s consultation document outlining the possible introduction of a new corporate re-domiciliation regime.

As part of the Autumn Budget, the UK government published a consultation to introduce a new UK corporate re-domiciliation regime.

What is corporate re-domiciliation

The domicile of a company is generally the jurisdiction under whose laws the company is incorporated or registered. Re-domiciliation is the process of a company relocating its domicile from one jurisdiction to another – in effect it ceases to exist in Country A but reappears in Country B.

Re-domiciliation of companies to and from the UK is currently not possible but has been a feature of a number of jurisdictions (high and low tax) for many years[1]. As it currently stands, a foreign company wishing to relocate to the UK needs to adopt alternative strategies, typically involving the establishment of a new UK entity to acquire the business and assets of the non-UK entity, or a UK holding entity acquiring shares in the foreign entity. These mechanisms often trigger complex, lengthy and costly steps and undesirable or unnecessary tax consequences.

Consultation

To bring the UK in line with other international peers, and to strengthen the UK’s position as a global business hub and an open, competitive, free market economy, the government intends to introduce the corporate re-domiciliation regime.

The current proposal only allows foreign incorporated entities to re-domicile to the UK – it will not permit re-domiciliation from the UK.

There are various criteria the non-UK entity will need to meet, as follows:

Authorisation from departing country

The law of the entity’s incorporated jurisdiction must allow outward re-domiciliation. The entity needs to comply with all legal requirements in relation to the transfer of registration and this would need to be evidenced by a consent of the departing jurisdiction’s competent authority.

Corporate form

Re-domiciliation will be available only to bodies corporate. This means companies and potentially foreign Limited Liability Partnerships.

Director of good standing

Directors must be eligible to act as directors in the current country of incorporation and there must be no legal or enforcement action being taken against them. They will also be required to meet the requirements of UK company law.

The application is in good faith

The UK authorities will have discretion to assess the application and satisfy themselves that the application is being made in good faith and that it poses no other risk such as to national security.

Registration fee

The government will introduce a registration fee to recoup the administrative costs to process and assess re-domiciliation applications.

Reporting evidence

The entity must have passed its first financial period end and provide relevant documentation.

Solvency

Only solvent entities can re-domicile to the UK.

Wider impact

A report that explains the full legal and economic impact of the transfer and the implications for creditors, shareholders and key stakeholders.

Tax Issues

As part of the consultation process, the government is also seeking views on the following tax issues:

Company residence

Under UK law, companies incorporated in the UK or foreign companies with central management and control in the UK are treated as UK residents for corporation tax purposes.

The government asks whether a non-UK company re-domiciling to the UK should be treated in the same way as a UK incorporated company (i.e. automatically UK tax resident), or should it be treated as a non-UK incorporated company requiring central management and control in the UK to be treated as a UK resident.

Loss importation

When non-UK resident companies become UK resident, they may be able to offset foreign losses against the UK profit of other group companies under the UK’s group relief provisions. The government has asked how material this risk is and if any additional protections need to be introduced.

Capital gains and intangible asset base cost on inward domiciliation

The government has asked what cost base should be used (i.e. market value similar to the EU rules) for assets brought into the UK corporation tax net as a result of companies migrating their residence to the UK.

Next Steps

The proposal is still in the consultation stage with a lot of significant questions from both a corporate law and tax perspective. Additionally, the government is also consulting on the possibility of permitting the outward re-domiciliation of UK-incorporated companies to other jurisdictions. The government still has a long way to go before the introduction of a UK re-domiciliation regime, but the consultation is a promising first step.


[1] Australia, Belgium, the British Virgin Islands (BVI), Canada, Cyprus, Guernsey, Jersey, Isle of Man Luxembourg, Malta, New Zealand, Portugal, Singapore, Switzerland, and several states within the United States.


Helen Siqin

Helen Siqin is a Senior Manager at Andersen in the UK.

Email: Helen Siqin