As part of last week's budget, the government announced plans to introduce a UK re-domiciliation regime. A joint BEIS, HMRC and HM Treasury consultation has been launched to seek views on the proposition.
What is re-domiciliation?
Re-domiciliation would enable foreign-incorporated companies to change their place of incorporation to the UK while maintaining their legal identity as a corporate body.
The proposed re-domiciliation regime is part of the government’s effort to strengthen the UK’s position as a global business hub and an open, competitive, free market economy. It notes that the UK is “a leading destination for investment and business, with a world-class regulatory and legal system, a leading financial services industry and is home to one of the world’s leading financial centres. Transparent and robust corporate law and governance frameworks are cornerstones of the UK economy. The UK has a highly competitive corporate tax system, as well as an extensive network of free trade agreements, which make the UK a highly attractive place to locate a business.”
Currently it is not possible for a foreign company to re-register as a company formed and registered under the law of either England and Wales, Scotland or Northern Ireland. Instead, relocation is most commonly achieved by the registration of an establishment in the UK, the incorporation of a new UK subsidiary entity (to which the assets of the foreign entity may be transferred) or, alternatively, the incorporation of a new UK holding company which acquires the shares in the foreign entity. These mechanisms can trigger complex, lengthy and costly administrative or regulatory issues, such as re-negotiations of contracts, or might result in complex group structures having to be maintained when they may otherwise be rationalised. They may also have undesirable or unnecessary tax consequences.
A separate re-domiciliation regime would allow overseas companies to maintain continuity of business operations and would reduce administrative complexity.
The consultation seeks views on whether UK companies should be allowed an equivalent right to re-domicile outside of the UK, but currently only proposes to legislate for inward re-domiciliation. It is also not currently part of the proposal to allow existing UK companies to re-domicile between nations (Companies House has three separate Registrars in the UK – one for England and Wales, one for Scotland and one for Northern Ireland).
The consultation closes on 7 January 2022.