October 2021 / United Kingdom

As part of the 2021 Autumn Budget announcement, the United Kingdom has initiated a public consultation seeking views from interested parties on the introduction of a corporate re-domiciliation regime that aspires to promote jobs, innovation and investment in the United Kingdom through enabling companies to take advantage of the United Kingdom's top-tier status as a global leading financial centre and its strong infrastructure and skills network.

The establishment of a re-domiciliation regime would enable a foreign-incorporated company to change its place of incorporation to the United Kingdom, while maintaining its legal status as a corporate entity.

According to the UK government, the introduction of an attractive corporate re-domiciliation regime would increase the competitiveness and availability of the United Kingdom as a destination to locate a business and to invest, and would also modernize the United Kingdom's legal framework, bringing it in line with around 50 jurisdictions that also have re-domiciliation regimes in place. Moreover, a new corporate re-domiciliation regime would contribute to increased investment and skilled jobs, as companies would transfer their headquarters to the United Kingdom, as well as increased demand for the United Kingdom's internationally respected professional services, such as audit, accounting and legal. The United Kingdom's innovation base would also be enhanced and expanded through non-resident companies choosing to re-locate research and development (R&D) functions in the United Kingdom.

Finally, the introduction of a corporate re-domiciliation regime could support and develop the United Kingdom's capital market, by making it easier for companies to re-domicile to the United Kingdom and access the United Kingdom's world-leading capital markets as UK companies. It could also improve corporate governance and transparency, as re-domiciled companies would be obliged to adhere to the United Kingdom's high corporate transparency and governance standards, which would guarantee better investor protections.

The public consultation outlines proposals and seeks public input on the following:

• the advantages of enabling companies to re-domicile to the United Kingdom;
• the level of demand that exists among various types of companies and sectors;
• the appropriate checks and entry criteria;
• the merits of establishing an outward corporate re-domiciliation regime; and
• the potential tax implications associated with the introduction of a corporate re-domiciliation regime.

The public consultation document can be accessed here (as a PFD).

On 27 October 2021, the United Kingdom (UK) Chancellor of the Exchequer, Rishi Sunak, presented the 2021 Autumn Budget to the House of Commons with a view to encouraging economic recovery from the COVID-19 pandemic through promoting investments in infrastructure, innovation and skills, levelling up public services such as the national health service (NHS), and public cultural institutions such as regional museums, libraries and orchestras, as well as strengthening working families' and the financial position of low-income earners. In this context, the UK Chancellor announced the following tax measures:

• the corporation tax rate increase from 19% to 25% effective from April 2023, which was announced as part of the March 2021 Budget has been maintained;
• the bank surcharge rate will be decreased from 8% to 3% with effect from April 2023;
• the business rates system for companies in the retail, hospitality, and leisure sectors will become fairer with cancellation of the planned increase in the tax rate multiplier due to inflation and the introduction of a 50% business rates discount lasting for 1 year;
• the GBP 1 million annual investment allowance for companies will be extended until April 2023;
• a new investment relief, encouraging investment in green technologies such as solar panels will be introduced;
• flights between airports in England, Scotland, Wales and Northern Ireland will be subject to a new lower air passenger duty rate effective from April 2023, whereas a new increase in the air passenger duty rate, covering ultra-long-haul flights of over 5,500 miles with an economy rate of GBP 91, will become effective from April 2023;
• the alcohol duty regime will become simpler, fairer and healthier through the reduction of the current number of duty rates from 15 to six (6) and the introduction of a the-stronger-the-drink-the-stronger-the-rate system. A 5% cut in alcohol duty imposed on draught beer and cider served from draught containers over 40 litres will be introduced. Also, there will be alcohol duty cuts on drinks made from fruit, such as cider, as well as on the sparkling wine premium. Finally, the planned increase in the alcohol duty on spirits, such as wine and whiskey, will be cancelled;
• the tonnage tax shipping regime will become simpler and more competitive through the rewarding of shipping companies adopting the UK flag;
• the planned increase in fuel duties will be cancelled;
• the residential property developers' tax on developers with profits over GBP 25 million will be set at a rate of 4%;
• the heavy goods vehicle (HGV) levy will be suspended until 2023 and the vehicle excise duty for heavy goods vehicles will be frozen; and
• the universal credit taper tax rate will be decreased by 8%, from currently 63% to 55% in order to financially support lower-income working individuals. The decrease will take effect no later than April 2022.

On 19 October 2021, the United Kingdom (UK) published a tax information and impact note, setting out the broad terms as well as the anticipated impact of the 2021 Free Zone regulatory regime. The legislation was published on 18 October 2021.

The Free Zones Regulations are divided into four parts, as follows:

• citation and commencement;
• provisions concerning customs;
• provisions concerning excise goods in free zones; and
• provisions concerning value added tax (VAT).

Each of the latter three parts amend existing relevant legislation, in order to enable the operation of free zones within freeports in the UK. The legislation will come into effect on 8 November 2021.

On 21 October 2021, HM Revenue and Customs (HMRC) published draft notices concerning the operation of free zones, which can be found here. The tax information and impact note can be found here and the Free Zones legislation can be found here.

On 20 September 2021, the United Kingdom updated its policy paper on the EU value added tax (VAT) e-commerce package, which had entered into effect on 1 July 2021.

The EU VAT e-commerce package introduces changes affecting:

• the movement of goods from Northern Ireland to the European Union;
• imports of low value goods in the European Union or Northern Ireland; and
• the rules for supplies made through online marketplaces.

As the Northern Ireland Protocol only applies to goods, the United Kingdom will not include electronically supplied services in its reporting system.

The HM Revenue and Customs (HMRC) policy paper outlines the changes for:

• distance sales, i.e. sale of goods between Northern Ireland and the European Union;
• imports;
• online marketplaces; and
• online marketplaces and supplies within the European Union.

The policy paper contains examples of how the EU VAT e-commerce package rules work in various situations for the United Kingdom. Reference is also made to the use of the One-Stop Shop and Import One-Stop Shop to reduce the administrative burdens.