UK: Redomiciliations: Should UK Multi-National Groups Move Offshore?

Last Updated: 30 March 2010
Article by Dominic Stuttaford and Ian Lopez


In the last fifteen months or so, a number of high profile UK listed companies have redomiciled from the UK. Some of the companies to redomicile have included United Business Media Plc, WPP Plc and Beazley Group Plc1. This article explains why a company may choose to redomicile and explains how to effect this.

Why redomicile?

Under current UK tax rules, a group which has a UK incorporated tax resident holding company and has UK income and non-UK businesses, pays UK corporation tax on its UK profits and is taxed at the local rate on its non-UK profits. If the non-UK businesses' effective tax rate is less than three-quarters of the UK rate (ie, 21 per cent based on a UK 28 per cent corporation tax rate), the non-UK income could be deemed to be income of the UK parent, even if not received in the UK and therefore subject to UK tax on the difference between the UK rate and the local rate. This is under the so-called UK CFC rules, which can impose both an administrative and financial burden for groups with a UK parent.

A company is only subject to the UK CFC Rules if it is "centrally managed and controlled in the UK"; there is a presumption that any company incorporated in the UK is centrally managed and controlled in the UK. Accordingly, a holding company which is UK incorporated is likely to be subject to the UK CFC Rules. On the other hand, if the holding company in a multi-national group is a non-UK incorporated company and the non-UK assets generating the non-UK income are owned by non-UK incorporated companies, the group will not be subject to the UK CFC rules. Redomiciling may therefore be worthwhile for a UK company which derives a significant proportion of its revenues from outside the UK or is likely to expand its operations outside the UK. The net result of redomiciling should be that the group should pay less tax on its profits and, therefore, all other things being equal, a move should enhance earnings per share. The benefits of redomiciling are not only the potential to save tax but also the possibility of reduced tax compliance costs. Working out which non-UK operations are caught by the CFC rules can be a costly and time-consuming task.

How does a company redomicile?

Redomiciling involves a two stage process:

Stage 1:

At Stage 1, a non-UK company is incorporated and becomes the holding company of the group. This is usually achieved by means of a UK scheme of arrangement. Pursuant to the scheme of arrangement, the existing ordinary shares of the current holding company ("Oldco") are cancelled and the resulting reserve arising from such cancellation is applied in issuing new ordinary shares to the new holding company ("Newco"). In consideration for the issue of such ordinary shares, Newco allots and issues ordinary shares to the former shareholders of Oldco.

Step (i): Ordinary Shares in Oldco cancelled.
Step (ii): Reserve arising from cancellation in Step (i) used in applying and issuing new ordinary shares in Oldco to Newco.
Step (iii): In consideration for the share issue in Step (ii), Newco allots and issues ordinary shares to the former shareholders of Oldco.

The net result of the Scheme is that shareholders "swap" their existing shares in Oldco for ordinary shares in Newco. Newco is admitted to listing and to trading on the London Stock Exchange.

Stage 2:

To ensure that the group is not subject to UK CFC Rules on its foreign income, at Stage 2 the UK income/assets/liabilities are separated from the non-UK income/assets/liabilities. How this will be achieved will depend on the make-up of the group concerned and the extent of the re-organisation required to achieve this and in some instances on the type of business. This could involve the transfer of subsidiaries or other income-generating activities so that they are directly owned by the non-UK parent/non-UK subsidiaries. Care will have to be taken to ensure that this can be done without a tax charge arising.

What approvals are required to effect the redomiciliation?

To implement Stage 1, Oldco will require shareholder approval at Court and General meetings. To implement both Stage 1 and Stage 2, bank consent (and if appropriate bondholder consent) may be required to the "change of control" and/or reorganisation of assets. In the current market, Oldco will need to be mindful that banks/bondholders may rely on a request for consent as an excuse to renegotiate terms /seek some financial incentive for giving consent. Consents may also be required under key commercial contracts depending on the terms of such contracts.


  • Shareholder Circular - sent to Oldco shareholders. Contains details of Scheme and Notice of General and Court Meetings to approve the scheme and related proposals.
  • Newco Prospectus - contains details of the group and is required to enable Newco to be listed. Published but not sent to Oldco shareholders.

What does redomiciliation mean in practice?

To maintain its new tax status, Newco must be "centrally managed and controlled" outside the UK.

The following points should be noted:

  • Central management and control is normally identified with the control which a company's board of directors has over its business and affairs, so that a company is normally resident in the jurisdiction where its board of directors meets.
  • It is necessary to distinguish between "central management and control" and lower level day to day or operational management and implementation of the strategy determined by the board of directors of Newco. The board of Newco will retain ultimate authority for high level strategic and management decisions of the company and all major transactions, but it may (subject to comments below) delegate to committees or other boards of subsidiaries to manage certain aspects of the group's affairs and to implement strategy.
  • Certain matters are reserved for the Newco board for decision, reflecting the fact that the board exercises control over Newco's affairs. The principal focus should be decision taking on the overall strategic direction, development and control of the group. The company's board approves the group's values, overall policies, strategic plans, annual budget, investment budgets, shareholder relations, larger capital expenditure proposals and the group's overall system of internal controls, governance and compliance.

It is usual for the Newco group to adopt certain internal operational guidelines to ensure the above principles are adhered to.

The guidelines will usually provide:

  • All Newco board meetings must take place outside the UK and usually the vast majority will be in the country where Newco is intended to be tax resident.
  • All committee meetings of Newco (audit committee; remuneration committee; nomination committee etc) will follow this principle.
  • Directors participating in board/committee meetings of Newco cannot do so if physically present in the UK at any time during the board /committee meetings. Provisions are included in Newco's articles to provide that in such circumstances such directors will not be entitled to count towards the quorum or be entitled to vote at such meeting.
  • The board of Newco should have at least two directors who are tax resident in the jurisdiction in which the company is tax resident. The quorum for board meetings will be two of which at least one must be one of the directors tax resident in the jurisdiction in which Newco is tax resident.
  • Written board resolutions cannot be signed by a director who is present in the UK at the time he signs the resolution.
  • All general meetings of Newco shall be held in the place where Newco is tax resident.

Tax residency

The vast majority of the recent redomiciliations have been implemented with a Jersey incorporated but Irish tax resident holding company2. Some of the main reasons for this are as follows:

  • ease of operation. As mentioned above, it is vital that Newco is "centrally managed and controlled" from the relevant jurisdiction. Ireland is comparatively close to the UK and easy to get to;
  • comfort that the Irish tax regime is suitable for Newco and if it ceases to be Irish tax resident, comfort that Newco can be extracted without a tax cost based on current Irish legislation.

Where should Newco be incorporated?

As mentioned earlier, Newco will be a non-UK incorporated company, to avoid a presumption that it is UK tax resident. The vast majority of redomiciliations that have been done over the last two years have used a Jersey incorporated holding company. The reason for this is that companies wishing to redomicile have presented the transaction to their shareholders as "business as usual" - apart from the change of tax residency, shareholders will be entitled to the same protections as they had with a UK incorporated holding company.

The benefits of using a Jersey holding company are as follows:

  • Jersey law is broadly speaking similar to the UK Companies Act 1985 and therefore provides much of the same protections offered to shareholders as those that would apply if the holding company were a UK incorporated holding company. To the extent that additional protections are provided by the UK Companies Act 2006, these are usually included in the Company's articles, as these will not apply automatically.
  • The UK Takeover Code automatically applies to Jersey incorporated companies.

In addition to the above it is usual for a company to indicate in the circular to shareholders seeking consent to the transaction that it will voluntarily comply with the Combined Code, Listing Rules, Prospectus Rules, Disclosure Rules and institutional guidelines as if it were a UK company - some of these rules/provisions would otherwise impose less stricter requirements on non-UK companies.


Under Irish law, any dividends paid by Newco will generally be subject to Irish dividend withholding tax at the standard rate of income tax (currently 20 per cent) unless the relevant shareholder falls within an exempt category. Under UK tax law, no withholding tax is imposed on UK dividends. Accordingly, to avoid being subject to Irish withholding tax, it is common for the Newco group to put in place a dividend access plan to enable shareholders to elect for a UK sourced dividend and therefore for such dividend not to be subject to Irish withholding tax. If Newco adopts a dividend access plan it will need to ensure that the relevant dividend access company has sufficient distributable reserves at the relevant time to satisfy elections for UK dividends.

Ian Lopez advised United Business Media Plc, WPP Plc and Beazley Group Plc on their respective redomiciliations to Ireland.

1 Other companies to redomicile have included Shire, Informa, Regus, Charter and Henderson
2 Most Companies that have redomiciled over the last 2 years have chosen to be Jersey incorporated but Irish tax resident. However Informa adopted a Jersey incorporated holding company and Swiss tax resident company and Regus is a Luxembourg tax resident but Jersey incorporated holding company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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