The UK budget announcements on 27 October 2021 included a proposed consultation on introducing a UK corporate re-domiciliation regime, to allow companies to re-domicile and therefore facilitate relocation to the UK.

The consultation document was released on 27 October 2021, with a request for comments from interested parties by 7 January 2022.

The consultation is asking for comments on the advantages of allowing companies to re-domicile; how much demand there would be for redomiciliation; which types of companies and sectors would use the rules.

A number of other countries including Canada, New Zealand, Belgium and some US states have introduced similar regimes. In some cases such as Ireland the redomiciliation regime is limited to investment funds only. The UK rules would not be limited to specific sectors or industries. Re-domiciliation would however only be possible from countries that allow outbound re-domiciliation.

The consultation document also asks for comments on any wider issues, such as administrative or financial barriers that may be an obstacle to redomiciliation.

Entry criteria

The consultation is looking for comments on the appropriate checks and entry criteria. The government considers that an economic substance test is not needed because this is not a requirement for domestic companies, and a substance test could block redomiciliation for a range of companies such as operating companies, holding companies or intellectual property firms. None of the re-domiciliation regimes in place in other countries requires a separate test for economic substance.

Eligibility criteria would be included to protect the UK tax base, ensure that the required standards of corporate governance are in place and ensure that liabilities in the previous country of residence have been settled properly. There would not be a minimum size or turnover for companies using the regime. The eligibility criteria would require evidence of solvency of the company and of the fitness of its directors.

Extended powers for registrar of companies

The government intends to introduce relevant legislation to reform the companies register and the role of the Registrar of Companies. The reforms would include a new requirement for company directors and persons of significant control (PSCs) to be subject to an identity verification procedure. The Registrar of Companies would have the power to challenge information provided and would have greater freedom to share the information with other authorities. The Registrar would be able to contact foreign authorities to verify the information submitted.

Outward redomiciliation

Outward re-domiciliation would allow companies to change their place of domicile to a foreign jurisdiction, if both countries have compatible redomiciliation rules. This would allow companies to keep the same legal identity and ensure continuity for the business. Currently this is not possible from the UK. Most countries that have an inward re-domiciliation regime also permit outward re-domiciliation, including New Zealand, Canada, Belgium, Luxembourg, Switzerland, some offshore financial centres and several US states.

Foreign tax losses

Companies redomiciling in the UK could try to import their foreign tax losses for offset against the UK profits of other group companies. Existing provisions to prevent this may not apply in all cases. Comments are invited on additional rules that could be introduced to prevent foreign loss importation.