Making it Easier to Move Company Domicile to UK for Tax

Published / Last Updated on 27/04/2022

The government has issued its response to the consultation paper on making it easier for incorporated (limited) companies to change their domiciliary position from overseas to the United Kingdom (UK) and vice versa.

Current Resident and Domicile Rules

  • Incorporated companies limited by shares (Limited companies) incorporated in the UK are subject to UK corporation taxes.
  • Incorporated limited companies set up overseas but with their central management or control based in the UK are deemed Controlled Foreign Companies (CFCs) and are subject to UK corporation taxes unless subject to being treated as non-resident by any double tax treaty between the UK and the overseas territory.

Consultation to Make It Easier to Change Domicile

The consultation paper covered suggestions to remove much of the red tape and make it easier for overseas companies to redomicile in the UK. 

A.  Rationale for Re-Domiciling in UK

In essence, the UK government is trying to attract more overseas companies to reregister in the UK for trade, economic and tax reasons.  Such companies thought to be on radar would be

  • Holding Companies (this is where the Holding Company pools the results of it’s subsidiary companies all over the World and pays taxes, offsetting losses for a company in territory A against profits in a subsidiary in territory B, and thereby not paying taxes in the subsidiary country but paying taxes, if any, in the Holding Company’s territory).  We are sure you have seen the likes of global tech brands, social media brands and coffee chains paying little if any taxes on profits made in the UK as they are offset against losses from another country subsidiary, with taxes then payable where the Holding Company is domiciled.
  • Investment Funds and Trusts.  Many funds may be registered say in Luxembourg or another state but are actually funds marketed to UK investors.
  • Venture Capital Trusts (VCT), clearly the government would like to attract more venture capital to the UK.
  • Brexit – many EU companies may have heavily traded with the UK but have now turned away due to trade restrictions or border issues.  It makes sense if an EU registered company did significant amounts of trade in UK, to redomicile in the UK and remove trade barriers.

B.  Entry Criteria for Re-Domiciling

  • Companies must have a good track record.
  • Corporate Governance must be strong.
  • Senior managers must be fit and proper without a criminal record.

More information is to be supplied by the government on the exact criteria details.

C.  Outward Re-Domiciliation

  • It has been agreed that a structure needs to be put in place to make it easier too for companies to move domicile overseas.
  • This is so that companies do not feel they move to UK and then due to changes in business patterns or taxes, they are better off moving overseas but then get trapped in UK red tape.

D.  Tax Incentives

UK corporation taxes are due to increase in scale up to 26% for larger companies from 2023 but it is agreed that tax incentives will no doubt be offered to companies in sectors that the UK wants to attract e.g., green energy, financial technology, cryptoassets, pharmaceuticals and more.

There are already many incentives for locating in deprived areas but also for research and development.  No doubt more tax incentives will follow.

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