Recommendations for a UK corporate re-domiciliation regime

On 14 October 2024, the Independent Expert Panel on Corporate Re-domiciliation (Panel) published its report on the establishment of a UK corporate re-domiciliation framework.

The Panel was commissioned by the Department of Business and Trade in December 2023 to propose a design for a corporate re-domiciliation framework in light of the responses received to its 2022 consultation.

The Panel recommends a two-way re-domiciliation regime allowing both non-UK registered corporate bodies to become UK companies and UK companies to re-domicile overseas while preserving their legal personality. The report also details how the corporate re-domiciliation regime should be implemented and identifies some of the key legal, regulatory and procedural adjustments that may be required to facilitate the regime.

Corporate re-domiciliation regimes already exist in some jurisdictions, including the EU, Singapore, Jersey and a number of US states. The Panel hopes that the option for companies to re-domicile into and out of the UK will make the UK a more attractive jurisdiction for global businesses wanting to build flexibility and agility into their corporate structures.

What are the objectives of the proposed regime?

Currently, international corporates seeking to domicile in the UK must navigate a range of regulatory, administrative and contractual matters to do so. Likewise, as there is no way to merge a UK entity into a foreign-incorporated entity, transferring a UK business abroad is often structured as an intra-group asset transaction, which involves a similar level of complexity.

The proposed re-domiciliation regime aims to simplify the process in both directions by allowing a company to relocate its legal home to a more strategically favourable jurisdiction as a “package” without changing its legal identity, the status of its employees, the effectiveness of its existing board and shareholder (and equivalent) authorisations, or the validity or enforceability of its existing contracts. It would be able to maintain its corporate history and goodwill without the financial and administrative burden of having to incorporate a new legal entity and transfer its business and assets to it.

What are the proposed criteria for in-bound and out-bound re-domiciliation?

In-bound re-domiciliation

• The applicant must be a solvent body corporate intending to continue business after re-domiciliation
• The applicant would have flexibility to become a private or public company in the UK regardless of its structure in its home country
• The application process for re-domiciliation would align as far as possible with requirements for new company incorporations in the UK with some differences such as the requirement to submit a solvency statement
• Regulatory oversight is proposed to be limited, with no recommended requirement for Companies House to make a “good faith” assessment and no recommended power for the Government to “call-in” in-bound re-domiciliation applications under the National Security and Investment Act 2021 (NSIA)
• The re-domiciled entity would become subject to UK company law from the date of re-domiciliation

Out-bound re-domiciliation

• The applicant must be a solvent UK company incorporated under the Companies Act 2006
• The process should include protections for stakeholders such as members and creditors including the requirement to submit a solvency statement
• The applicant must confirm that the target jurisdiction permits re-domiciliation without altering the company’s legal personality
• The Secretary of State would have reserve powers to prohibit re-domiciliation to specified countries
• Out-bound re-domiciliation should constitute a trigger event under the NSIA for potential mandatory notification

What does the Panel say about the potential tax implications of re-domiciliation?

The Panel highlights the importance of ensuring that any new system is as simple and integrated as possible and does not create a separate tier of tax system for re-domiciled companies.

UK tax legislation would apply automatically to an entity which has re-domiciled to the UK from the date of re-domiciliation, for example, requiring stamp duty/SDRT payments on the transfers of shares in the re-domiciled company.

The Panel recommends that re-domiciliation into the UK should not alone give rise to a UK tax charge on the company on entry into the UK tax system. However, some new tax legislation and guidance would be needed to address specific tax issues on entry into the UK tax system, including on questions of tax residence, rebasing of assets, application of the controlled foreign company rules, and loss importation.

The approach taken in relation to tax on out-bound re-domiciliation should correspond to the approach taken for in-bound re-domiciliation, including mirror provisions relating to tax residence and an exit charge based on the assets of an entity which re-domiciles out of the UK and ceases to be UK tax resident as a result

What next?

The Government will launch a consultation once the re-domiciliation regime has been designed and seek input from regulators such as the Registrar of Companies and the Financial Conduct Authority. Legislative changes will then be put before Parliament to approve.

In the interim, please contact Eversheds Sutherland’s UK Corporate and Tax teams for any support your business requires on domiciling in the UK, internal transfers of UK businesses or entities, whether domestic or cross-border, or any other form of international business reorganisation.