Based on a consultation paper it published in connection with the recent Autumn Budget (Consultation), the UK government intends to introduce a re-domiciliation regime under which foreign companies would be eligible to move their place of incorporation to the UK (this is not currently possible). Unlike other entry options for foreign companies, such as opening a branch or establishing a subsidiary, re-domiciliation would permit the conversion of a company established overseas to a UK registered company, which would then become subject to the laws and regulations of the UK. The principal advantage of this, based on the consultation paper, would be the continuation of the company’s business or other operations: its contracts, intellectual and other property rights and regulatory approvals would all generally remain intact. However, a foreign company looking to re-domicile to the UK under these proposals would first need to ensure that it is from a jurisdiction - such as New Zealand, Canada, Luxembourg or Switzerland- which allows for outward re-domiciliation. It is also clear from the consultation paper that any re-domiciliation of a foreign company to the UK would be subject to a number of eligibility criteria such as: full compliance with the outward re-domiciliation regime of the company’s previous jurisdiction, satisfaction of tests relating to the company’s solvency, that the re-domiciliation poses no security risk and is not contrary to the public interest.
The UK government is additionally consulting on the possibility of permitting the outward re-domiciliation of a UK-incorporated company to another jurisdiction. In this regard, the government notes that jurisdictions which permit inward re-domiciliation often permit the opposite. However, this is not always the case and the government seem less enthusiastic about this aspect of the consultation than inward re-domiciliation, citing the need, for example, for protections against the outgoing company failing to settle outstanding liabilities and other risks to the UK’s economic interests.
Overall, these proposals are welcome and interested parties have until 7 January 2022 to respond to the questions that the UK government raises in its consultation paper. For example, the consultation poses questions regarding the tax implications of both inward and outward re-domiciliation such as in relation to: (i) the tax residence of the relevant company, or (ii) its ability to import relievable losses into the UK and (iii) the base cost of its assets once the company is re-domiciled to the UK. The consultation paper duly solicits views on these and a number of other areas.