With much of last week’s Budget pre-announced (in a potentially ministerial code-breaking manner), and focussing mainly on spending commitments and forecasts rather than tax changes, it is interesting to take a look at another consultation launched with a little less fanfare.
As globalisation led to multinational corporations becoming increasingly location ambivalent, so tax mismatches and gaps between jurisdictions opened up for exploitation and drove structuring decisions. International cooperation on closing these gaps lagged; the Double Irish arrangement (whereby $100bn in profits of US multinationals was routinely sheltered from US tax each year) was only closed in 2020, more than 30 years since being identified.
However, with an agreed minimum corporate tax rate of 15% among 140 countries announced by the OECD in October (in response to which, and under pressure from the EU and US, Ireland increased its corporate tax rate from 12.5% to 15%), steps are being taken to bring the tax regime up to date and match the streamlined approach that international trade has enjoyed for decades.
It is against this backdrop, of tax becoming less of a distinguishing characteristic between jurisdictions, that the Government has published a consultation on allowing non-UK entities to change their place of incorporation to the UK, while maintaining their legal identity.
Non-UK business structures can currently be brought into the UK but require a new UK entity to be incorporated. Re-domiciliation, as the process is known, would streamline this process, substantially reducing the complexity and allowing business continuity for the legal entities.
Re-domiciled companies could bring increased investment and jobs to the UK, and with the R&D tax credit now targeted at activity happening in the UK, onshoring of such activity.
If the UK is to make the most of its much-vaunted post-Brexit agility, and the ancillary services that have grown around inward investment (accountancy, legal, audit etc.), it is vital that such opportunities are capitalised upon.
The consultation is available on the Government website with responses invited by 7 January 2022: http://www.gov.uk/government/consultations/corporate-re-domiciliation
The next steps
For more information, get in touch with John Mosford on j.mosford@uhy-uk.com or your usual UHY adviser.
