The government has announced its intention to introduce a “re-domiciliation” regime under which companies incorporated outside the UK could move their place of incorporation to the UK, while maintaining their existing legal identity. The government states this will increase the attractiveness of the UK as a destination both to locate a business and in which to invest. The government also believes this would lead to additional adoption of the UK’s high corporate transparency and governance standards, meaning better investor protections. A consultation has been launched to seek stakeholder views on the proposal by 7 January 2022, including the associated tax considerations.
The consultation document indicates that the government is also considering whether a similar mechanism for outward re-domiciliation from the UK should be introduced.
Under current rules it is generally possible for the tax residence of a company to be migrated to the UK (i.e. based on the location of central management and control of the company) but UK company law does not currently include any mechanism for a change in the place of incorporation. Accordingly non-UK companies seeking to achieve a UK place of incorporation typically need to undertake restructuring e.g. through creation of a wholly new company and a transfer of assets. The proposal would thus represent a significant change in approach.
Notable points mentioned in the consultation document include:
Non-UK incorporated companies wishing to migrate their place of incorporation to the UK. This might be the case, for example, where it assists them in accessing capital markets or facilitates changes in their business operations. Depending on the detail of any final proposals, it may also be relevant to UK incorporated companies wishing to migrate their place of incorporation out of the UK.
Consultation responses are requested by 7 January 2022. No timing has been announced for any ultimate enactment of the measure.
This consultation is welcome. If enacted, these proposals should reduce some complexity for businesses seeking to locate certain activities in the UK. A number of other countries already permit inward and outward re-domiciliation under their corporate law and so this could be seen as bringing the UK into line.
Companies will of course be interested in the detail of any final proposals and in particular the ability to achieve a reasonable degree of certainty in relation to the tax aspects of any re-domiciliation, as these could often be very significant.