UK government plans to introduce a re-domiciliation regime

On 27 October 2021, HM Treasury, BEIS and HMRC published a consultation paper seeking views on proposals for a UK re-domiciliation regime under which foreign-incorporated companies could change their place of incorporation to the UK while maintaining their legal identity as a corporate body.

Key Issues

The legal systems in many jurisdictions around the world, including Canada, New Zealand, Singapore, certain US states, Belgium and Luxembourg, currently include regimes that allow companies to “re-domicile” by shifting their place of incorporation from one jurisdiction to another while maintaining the same legal identity. This mechanism can present a number of practical and legal advantages compared with other alternatives for moving operations between jurisdictions, such as creating a new local entity and transferring the business and assets from a foreign entity or setting up a new local holding company and transferring the shares in the foreign entity, each of which can often require significantly more work to implement and may lead to undesirable tax consequences.

The consultation seeks to explore:

  • the advantages and demand for a re-domiciliation regime within the UK;

  • appropriate entry criteria for re-domiciling companies;

  • the merits of establishing an outward re-domiciliation regime (i.e. that would permit UK companies to redomicile to another jurisdiction), and

  • the potential tax implications of implementing a re-domiciliation regime.

Observations

As the consultation paper sets out, the Government clearly hopes that the new re-domiciliation regime might strengthen the UK’s position as a global business hub, giving the UK corporate legal regime a new tool that other international jurisdictions already enjoy and encouraging companies to relocate to the UK. At this stage, however, it is also clear that some of the key details, particularly as regards tax implications and any checks necessary to maintain corporate governance standards, remain to be worked out. These are likely to be central to the success of the initiative.

 

Next steps

The consultation ends on 7 January 2022.

 

 

Authored by Tamsin Dow.

Contacts
John Allison
Partner
London
Tom Brassington
Partner
London
Jonathan Russell
Partner
London

 

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