In our recent article on Corporate re-domiciliation we discussed the UK Government's proposal to introduce a re-domiciliation regime under which overseas-incorporated companies would be eligible to move their place of incorporation to the UK, which is not currently possible (Consultation). As part of that proposal, the Government published a consultation document, soliciting views from interested parties in a number of areas relating to the proposed regime. The aim of the UK re-domiciliation regime, as stated in the consultation document, would be to encourage companies to relocate to the UK, the expectation being that this will bring investment, skilled jobs and other benefits to the UK's economy. A number of other countries already allow for this type of re-domicilation into their jurisdiction, such as Jersey, Singapore and Canada.
The originally announced consultation closed in January of this year and a report summarising the 40 responses to the consultation was duly published in April (Responses). Based on that report, a significant majority of respondents supported the Government's proposals for a re-domiciliation regime (ca. 80%). However, respondents noted that the decision of a company to migrate to the UK would largely be determined by the attractiveness of the UK's wider business environment - rather than rest solely on the availability of an easily accessible re-domiciliation regime.
According to the report, a majority of respondents also supported a regime that permitted re-domiciliation out of the UK, primarily on the basis that permitting outward re-domicilation would increase demand for inward re-domiciliation. Some respondents also indicated that prohibiting outward re-domicilation might send a negative signal to businesses regarding the competitiveness of the UK economy. Respondents additionally suggested that a company that re-domiciles to the UK should be temporarily blocked from re-domiciling back out of the UK (a three year exit block was suggested).
On the taxation front, there was general support for treating re-domiciled companies in the same way as UK-incorporated companies for tax purposes, rather than creating new categories of tax treatment for companies that re-domicile here. For example, there was general support for treating a company that redomiciles to the UK as automatically resident in the UK for tax purposes (subject to alternative provision under a double tax treaty) since this is the treatment generally accorded to companies which are already incorporated here (s14 Corporation Tax Act 2009). In a similar vein, respondents thought that the UK stamp tax treatment of shares in originally UK incorporated and re-domiciling companies should be the same and that, accordingly, transfers of shares in both should, generally, be subject to those taxes.
Respondents otherwise gave their views or raised concerns in a number of areas relating to the UK's proposed re-domiciliation regime, including in relation to how differences in company law between the jurisdiction of the re-domiciling company and the UK may impede the company's redomiciliation here, the impact of re-domiciliation on the company's existing contracts and how re-domiciliation might enable companies to avoid tax investigations or the payment of debts in the jurisdiction from which they re-domiciled.
In summary, this is a complex area involving a wide range of considerations. It remains to be seen, therefore, where the government ultimately lands on its proposal, although based on the summary of responses report mentioned above the government remains committed to introducing at least a UK re-domicilation regime under which overseas incorporated companies would be eligible to re-domicile to the UK. In the meantime, we understand that HM Treasury, BEIS and HMRC are continuing their work in this area, which may include a further round of public consultation.
Originally Published 25 May 2022
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