The Government of the United Kingdom has published proposals regarding the possibility of re-domiciliation of companies from other jurisdictions to the UK. Corporate re-domiciliation means relocating a company from one jurisdiction to another while maintaining its identity as a legal person. After re-domiciliation, Companies incorporated outside the UK will be entirely governed by UK laws. The Government intends to allow re-domiciliation for all legal entities insofar as they are comparable with the UK legal forms. It is assumed that re-domiciliation will be possible both to and out of the UK.
The option to relocate to the UK will be available not only for European companies. Re-domiciliation can also be allowed to companies incorporated in Canada, New Zealand, Singapore, several US states (Delaware, Florida, Wyoming and others), Cyprus, Malta, Belgium, Luxembourg, and (solely for investment funds) Ireland, and many offshore financial centres. The Government believes that re-domiciled companies will not be subject to economic substance conditions. It also is not planning to prescribe a minimum turnover for companies wishing to re-domicile to the UK.
For tax purposes, the assets of the companies re-domiciled to the UK will be appraised at their market value. However, it is unclear whether this rule can apply to companies moved from non-EU jurisdictions.
As part of the consultations, it is proposed to consider the implications of re-domiciliation on personal tax liabilities of individuals (owners of companies) and stamp taxes. Stamp tax generally arises on transfers of existing shares issued by UK incorporated companies but does not apply to the issue of new shares.
Regarding tax residence of companies re-domiciled out of the UK to another jurisdiction (assuming that their central management and control are exercised outside the UK), the Government is considering two options: a company ceases to be UK resident by virtue of the re-domiciliation or continues to be treated as UK resident unless it is treated as a non-UK resident under a double taxation agreement.
To re-domicile to the UK, the incoming companies must meet the proposed eligibility criteria:
- Companies can only re-domicile to the UK if their current place of incorporation allows it and they have complied with all legal requirements in their country of origin.
- No legal or enforcement action in the current country of incorporation is being taken against the company’s directors. Directors must also meet all the requirements of UK company law.
- Re-domiciliation must be made in good faith (for example, not to evade creditors) and must not pose any risks to national security.
- The processing of the application for re-domiciliation will be conditioned by payment of a registration fee.
- Only solvent companies will be able to re-domicile to the UK. The company’s assets must exceed its liabilities.
- Companies must not be in liquidation or similar procedures.
The public is invited to express their views on 45 questions. In particular, the stakeholders are asked about:
- the advantages of re-domiciliation in comparison with existing methods of relocation of business to the UK;
- types of companies and sectors of the economy that will be most interested in re-domiciliation;
- the level of demand the UK might expect from the foreign companies seeking to re-domicile;
- the jurisdictions from which companies would most likely re-domicile to the UK?
- the features of foreign re-domiciliation regimes that the UK should adopt or avoid?
- the factors that would influence the choice of the UK as a place of incorporation;
- pros and cons of the possible time limit of being domiciled outside the UK before re-domiciliation; and others.
The consultations’ closing date is 7 January 2022.