Corporate re-domiciliation gets a step closer

Corporate re-domiciliation gets a step closer

In October 2021 the UK Government launched a consultation on the feasibility of introducing corporate re-domiciliation. This with a view to enabling companies which had been incorporated overseas to change their place of incorporation to the UK whilst maintaining their legal entity as a corporate body.

Following that consultation the Government has now published a summary of responses received. Whilst further work will be required before legislation is laid before Parliament, the Government has been sufficiently encouraged by the responses to announce that it intends to proceed with its re-domiciliation plans.

One key area for further consideration is the need to develop a better understanding of how the scheme would work in practice. Respondents to the consultation felt it was important to balance simplicity of design with rigorous checks to ensure companies were not using re-domiciliation as a ‘back door’ way to enter UK markets. Another area for consideration was seen as the potential impact on personal tax liabilities for both directors and shareholders of companies, alongside a concern about companies potentially using re-domiciliation as a means of tax avoidance.

In their responses the majority of respondents called for a two-way regime which enabled companies to re-domicile both into and out of the UK. This, the responders considered, would make the UK more attractive to companies which might welcome a more flexible regime. There was also considerable support for the belief that the wider UK business environment and tax regime was key to attracting businesses to the UK and therefore the presence of a re-domiciliation scheme will not on its own be sufficient to encourage businesses to switch to the UK.

Given the further work required, it may be some time before the re-domiciliation scheme legislation is drawn up. Pending the introduction of a scheme, there are alternatives available for companies wishing to engage in the UK marketplace. Options include setting up a UK subsidiary or perhaps the insertion of a UK holding company into the group structure.

In certain circumstances it can also be possible to on-shore a non-UK company for tax purposes. Elemental is experienced in helping companies which wish to break their existing taxation arrangements and establish a new tax residency in the UK. We can not only provide guidance on the process required for change, we can also help to identify what changes may need to be made to current company systems in order to meet UK accounting and other regulations.

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