United Kingdom

The UK does not have a legal framework supporting corporate re-domiciliations by moving a company’s place of incorporation. Prior to Brexit, UK law catered for the establishment of a “Societas Europaea” (a type of European public limited liability company with the ability to move between jurisdictions within the EU). Following Brexit, Societates Europaeae can also no longer be registered in the UK. The UK has legislated for a new UK corporate structure, the UK Societas, but these entities are not able to move their registered office out of the UK.

The introduction of a re-domiciliation regime is the subject of a UK government consultation. An Expert Panel report on the topic was published in October 2024. The Secretary of State for Business and Trade stated that the “Government is committed to taking steps to make the UK a place where foreign companies can easily relocate their incorporation…The Government welcomes the Panel’s report and intends to consult in due course on a proposed regime design.”

One key consequence of a re-domiciliation is the transfer of tax residence from the departure State to the destination State. There are two ways a change in tax residence can be effected under UK law, namely direct migrations and corporate inversions.

A direct migration involves changing a company’s jurisdiction of tax residence by moving its “central management and control” – either to the UK (for a direct immigration of a company incorporated abroad) or out of the UK (for a direct emigration of a UK-incorporated company). A direct emigration of a UK-incorporated company is possible only if the destination State also applies a management-based tax residence test. If, for example, the intended destination State regards companies as tax resident there only if they are incorporated in that State, a direct emigration by moving “central management and control” is not possible.

In practice, moving “central management and control” requires the strategic decision-making organ of the company (generally the board) to start performing its strategic decision-making functions in the destination country (i.e. in the UK for the direct immigration of a company incorporated abroad or the relevant other country for the direct emigration of a UK-incorporated company).

One immediate result of moving “central management and control” in this way can be that the company is tax resident in two jurisdictions, namely the jurisdiction in which it is incorporated and the jurisdiction in which it is managed. In that case, it is necessary to rely on the double tax treaty between the relevant jurisdictions to determine where the company should, in fact, be treated as solely tax resident. If the applicable treaty contains a “place of effective management” tie-breaker, tax residence should automatically be allocated to the State where the company is managed. The UK now has fewer treaties with such tie-breakers. Many require the place of tax residence to be decided by a MAP between the relevant two countries’ tax authorities. If those tax authorities cannot reach an agreement, the company will be dual tax resident.

No UK transfer taxes should arise on a direct migration (whether inbound or outbound). This is because moving a company’s “central management and control” does not (by itself) involve any potentially chargeable transaction (such as the transfer of shares or UK real estate).

No UK withholding tax should be triggered on a direct migration (whether inbound or outbound). However, the withholding tax treatment of payments made by the company following the migration may change. For instance, payments of interest by a company may be brought within the scope of UK withholding tax following that company’s immigration to the UK.

There is no general rule allowing a step-up in tax basis of the company’s assets on becoming UK tax resident (although certain intangible assets are treated as acquired for net book value). However, the company will, on becoming UK tax resident, benefit from a market value step-up in relation to its capital gains assets and intangible fixed assets if those assets have been subject to an exit tax charge in an EU Member State in accordance with Article 5 of ATAD.

There are no rules which would “restart the clock” on any holding period for tax purposes. Therefore, any assets (including shares) held by the immigrating company should generally be treated as having been held since their acquisition (and not only from the immigration date). This includes the 12-month holding period that must be completed before the UK’s participation exemption (SSE) can apply.

Unless the emigrating company retains a UK PE and relevant assets and business activities continue be held and run through that PE, certain tax charges and consequences may arise.

First, an exit charge may arise. The emigrating company would be deemed to have disposed of and reacquired all its assets for market value immediately before ceasing to be UK resident. Second, the emigrating company may also be deemed to have ceased trading in the UK. This can have a variety of consequences, including charges under the UK’s capital allowances regime (which, broadly, governs tax relief for the depreciation of assets like plant and machinery and certain other capital assets) and a deemed disposal of trading stock for market value.

It is also worth noting that, when a company ceases to be UK resident, this triggers the end of an accounting period (and therefore accelerates the deadline for submitting a tax return for the period up to the point of emigration). The company must give notice of its intention to emigrate to the relevant UK tax authority, His Majesty’s Revenue and Customs (HMRC). This notice must include a statement of its expected tax liabilities up to the emigration date. In general, the company must then agree arrangements with HMRC to pay those tax liabilities.

A corporate inversion involves establishing a new holding company at the top of the group (and, where desirable, transferring the business/assets from the wider group to the new holding company). For an inward inversion, the holding company would be incorporated in the UK; for an outward inversion, the holding company would be incorporated in the relevant other country.

It would be unusual for UK transfer taxes to apply, but this depends on the precise transactions that occur.

No UK withholding taxes should arise on an inversion (whether inbound or outbound).

For companies which immigrate to the UK by way of corporate inversion, the new UK holding company will usually obtain market value basis in the shares it acquires in the original non-UK holding company. If non-UK members of the group then transfer assets to the new UK holding company, the new UK holding company will usually obtain market value basis in those assets, too.

The new UK holding company will usually be treated as having held the shares in the original non-UK holding company, and any assets transferred by the non-UK group, from the actual date on which it acquired them.

There are no specific exit charges or similar rules for companies which emigrate by way of corporate inversion. However, any reorganisation of the group (e.g. to transfer non-UK trading subsidiaries from the original UK holding company to the new non-UK holding company) needs to be considered carefully to determine whether those disposals by the original UK holding company would be subject to UK tax or benefit from a relief.