The CIOT has put forward a detailed submission in response to the government consultation, highlighting a number of recommendations.
The CIOT says a re-domiciliation regime that permits inward and outward re-domiciliation will be helpful for businesses that wish to relocate to the UK or are seeking to relocate abroad, particularly where it leads to more straightforward rules. Such regime in itself is, however, unlikely to incentivise businesses to move to the UK. The CIOT therefore encourages the government ‘not to lose focus on ways to make the UK’s tax system better overall’ as a favourable tax regime on more substantive issues is more likely to have a positive impact on the UK’s global competitiveness.
According to the CIOT, there should be parity between companies originally incorporated in the UK and those that re-domicile in the UK. It would be unhelpful for UK law to create different classes of UK domiciled companies.
There should be parity between the rules applying in relation to tax migration through existing mechanisms (e.g. moving central management and control) and the new re-domiciliation regime. This should also apply for outward migration so there is no difference between outward re-domiciliation and outward migration.
Clarification on how tax residence is to be resolved following re-domiciliation will be required, the institute says. It is currently not clear what form that resolution might take. The CIOT favours that subject to any double tax agreement the company will be treated as UK resident by virtue of the re-domiciliation. For outward re-domiciliation, the CIOT similarly favours that, subject to central management and control being outside the UK, it will cease to be UK resident by virtue of the domiciliation.
Loss importation (i.e. companies coming to the UK to use losses against other UK profits) may be an issue. Some form of barrier, or ring-fencing of losses, in circumstances where a company remains resident in another jurisdiction as well as the UK, may be appropriate. These rules must be clear and straightforward to apply in practice.
The CIOT suggests that there should be no tax difference between outward re-domiciliation and outward migration on capital gains and intangible asset base costs. If the government agrees to uplift the tax basis for inward re-domiciliation, the same should apply (but currently does not) for inward tax migration.
On the potential impact of the proposals on personal taxation for the owners of companies, the CIOT suggests that, if there are concerns that re-domiciliation may be utilised for short-term tax benefits outside the policy intent, consideration might be given to a minimum period before outward re-domiciliation akin to the capital tax gains temporary non-residence provisions. Income and gains could then be attributed to periods before and after re-domiciliation.
The CIOT also notes that compliance and administration implications for re-domiciliation need to be considered ‘at an early stage’ – particularly in terms of filing requirements and deadlines.
The CIOT has put forward a detailed submission in response to the government consultation, highlighting a number of recommendations.
The CIOT says a re-domiciliation regime that permits inward and outward re-domiciliation will be helpful for businesses that wish to relocate to the UK or are seeking to relocate abroad, particularly where it leads to more straightforward rules. Such regime in itself is, however, unlikely to incentivise businesses to move to the UK. The CIOT therefore encourages the government ‘not to lose focus on ways to make the UK’s tax system better overall’ as a favourable tax regime on more substantive issues is more likely to have a positive impact on the UK’s global competitiveness.
According to the CIOT, there should be parity between companies originally incorporated in the UK and those that re-domicile in the UK. It would be unhelpful for UK law to create different classes of UK domiciled companies.
There should be parity between the rules applying in relation to tax migration through existing mechanisms (e.g. moving central management and control) and the new re-domiciliation regime. This should also apply for outward migration so there is no difference between outward re-domiciliation and outward migration.
Clarification on how tax residence is to be resolved following re-domiciliation will be required, the institute says. It is currently not clear what form that resolution might take. The CIOT favours that subject to any double tax agreement the company will be treated as UK resident by virtue of the re-domiciliation. For outward re-domiciliation, the CIOT similarly favours that, subject to central management and control being outside the UK, it will cease to be UK resident by virtue of the domiciliation.
Loss importation (i.e. companies coming to the UK to use losses against other UK profits) may be an issue. Some form of barrier, or ring-fencing of losses, in circumstances where a company remains resident in another jurisdiction as well as the UK, may be appropriate. These rules must be clear and straightforward to apply in practice.
The CIOT suggests that there should be no tax difference between outward re-domiciliation and outward migration on capital gains and intangible asset base costs. If the government agrees to uplift the tax basis for inward re-domiciliation, the same should apply (but currently does not) for inward tax migration.
On the potential impact of the proposals on personal taxation for the owners of companies, the CIOT suggests that, if there are concerns that re-domiciliation may be utilised for short-term tax benefits outside the policy intent, consideration might be given to a minimum period before outward re-domiciliation akin to the capital tax gains temporary non-residence provisions. Income and gains could then be attributed to periods before and after re-domiciliation.
The CIOT also notes that compliance and administration implications for re-domiciliation need to be considered ‘at an early stage’ – particularly in terms of filing requirements and deadlines.
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