As part of its strategy to strengthen the UK’s position as a global business hub, BEIS has published a consultation setting out proposals to make it possible for companies to move their domicile to and relocate to the UK, by enabling the ‘re-domiciliation’ of companies.
The UK is currently behind the curve in this respect with many other jurisdictions such as Canada, New Zealand, Australia and Singapore already offering this option.
Currently it is not possible for a company to transfer incorporation to the UK and retain the same legal identity. The routes that need to be followed at the moment, which involve the creation of a new UK entity or a new UK holding company, can lead to complex, lengthy and costly administrative or regulatory issues and may have undesirable or unnecessary tax consequences.
The Government intends to ensure that the new regime is open to as broad a range of companies as possible, and believes that qualifying economic thresholds are not necessary. Re-domiciled companies would have to abide by the same rules and standards as any other UK incorporated company and will have to follow the UK’s corporate governance and governance standards, meaning better investor protections.
There will however be a set of eligibility criteria, designed to protect the UK tax base and to ensure that the high corporate governance standards are met and that liabilities are properly dealt with in the departing country. The criteria include a requirement that the firm can only re-domicile if their current place of incorporation allows it and they have complied with all legal requirements in relation to the transfer of registration. Directors must be of good standing, the application must pose no national security risk and the firm must be able to demonstrate a financial track record, having passed its first financial period end. The consultation also acknowledges potential for abuse of the system and asks what measures should be considered to protect creditors of companies which become insolvent shortly after re-domiciling.
The Registrar of Companies would be given new powers to liaise with foreign counterparts to verify the information submitted, with an acknowledgment that this will not always be straightforward.
The consultation asks for views on the above and other issues such as whether the UK should also consider an outward re-domiciliation regime alongside the inward proposals and whether specific legislation should be introduced to clarify the consequences on a re-domiciling company’s tax residence status. Responses to the consultation are invited by 7th January 2022. Please get in touch with us if the development is of interest.
