As part of the 2021 Budget, the Government has published a consultation on its proposal to introduce corporate re-domiciliation legislation in the UK. This move would bring the UK in line with a number of other common law jurisdictions, and is part of the Government's drive towards making the UK an attractive hub for global business.
At present, it is not possible for foreign companies to straightforwardly transfer their place of incorporation to the UK, and instead work-arounds such as forming a UK entity must be used, which may have complicated and unwanted legal and tax implications. This proposal would make it possible for foreign companies to move to the UK whilst keeping their legal identity and structure intact.
As the proposal is currently undergoing consultation, it may be subject to further adaptation. However, the key take-aways at present appear to be that:
- There will be no economic substance test, but companies wanting to take advantage of UK re-domiciliation will need to meet certain eligibility criteria, and may need to make changes to their corporate form so that they are 'comparable' with the UK regime
- It is unclear from the consultation if the Government will make the process reversible, thereby allowing outward re-domiciliation, but it is confirmed they are not currently considering allowing re-domiciliation between UK nations
- The effect of re-domiciliation (either inward or outward) on the UK tax residence of a company is yet to be decided by the Government, and the consultation queries whether the re-domiciliation should be determinative in this
The consultation is seeking views on the advantages of and demand for the new regime, along with any necessary checks and balances and tax implications, with responses requested by January 7, 2022. It remains to be seen what form any resulting legislation will take.