Policy paper

Statement of Practice 2 (1990)

Published 9 January 1990

1. Finance Act 1988 section 130 requires a company to notify the Commissioners for HM Revenue and Customs (HMRC) of its intention to cease to be resident in the UK and to obtain the Commissioners’ approval of arrangements for payment of the company’s tax liabilities. These notes explain the procedure to be followed, the information required in support of a request for approval and the arrangements which will normally be acceptable to the Commissioners for HMRC.

2. Notice

2.1 A notice under FA 1988 section 130(2)(a) should be sent to:

HMRC
CT and VAT: International (Company Migrations)
Floor 3c
100 Parliament Street
London
SW1A 2BQ.

The notice should give the intended date of migration (see paragraph 5 below). The information required by section 130(2)(b), (c) should normally be sent with the notice (ie, the statement of tax liabilities and proposals for securing payment - see paragraph 3(d) and (e) below).

2.2 As the Commissioners for HMRC will have to check the statement of tax payable with the company’s tax district, it would be useful if a copy of the notice and of the tax computation could be sent to the company’s tax district at the same time.

3. Information to be supplied

(a) The name of the company, its address in the UK and its place of incorporation.

(b) Its tax district and reference number.

(c) A copy of the latest available accounts.

(d) A detailed statement of all tax liabilities which are or will be due for periods commencing before the date of migration. The statement should cover Corporation Tax and advance Corporation Tax and, if relevant, all taxes mentioned in section 130(7) and any accrued interest on tax (section 130(8)). It should include any charges which arise as a consequence of the migration itself eg, under Income and Corporation Taxes Act (ICTA) 1988 section 337(1) and Taxes and Capital Gains Act (TCGA) 1992 section 185. (If an unlimited guarantee is to be offered - see paragraph 4.3 - the statement can be restricted to a brief summary of the tax position.).

(e) The company’s proposals for securing the payment of tax liabilities. These should include the name and address of the proposed attorney and of the proposed guarantor (see paragraphs 4.1 and paragraph 4.2).

(f) If a corporate guarantor other than a bank is proposed (see paragraph 4.2), a copy of its memorandum and articles of association.

4. Arrangements for securing payment of tax

4.1 (a) It will normally be necessary to appoint an attorney to act for the company in tax matters, eg, to receive notices of assessment. The attorney must be a person resident in the UK and will usually be an individual who is professionally qualified eg, as a solicitor or accountant. The Commissioners for HMRC will need to be satisfied that the migrating company has power to appoint an attorney. Further information and drafts of the power of attorney in a form approved by the Commissioners for HMRC are available from the above address.

4.1 (b) The capacity of a migrating company to appoint an attorney may be demonstrated by the opinion of a lawyer qualified in the appropriate local law upon the following matters:

• (i) that the company has power by its constitution and/or by appropriate local law to appoint an attorney in the terms of the draft power of attorney (see paragraph 4.1a above)
• (ii) to know what formalities, if any, are required for a valid exercise of the power to appoint an attorney
• (iii) how the deed in the form of the draft power of attorney should be executed and whether execution should be notarily attested

4.2 The precise form of the arrangements will vary from case to case. Normally they will take the form of a guarantee from a company which must be either resident in the UK or a UK branch of a foreign bank. A guarantor company must of course have power to act as guarantor and the copy of its current memorandum and articles is required to satisfy the Commissioners for HMRC of this. The memorandum and articles should be certified by a solicitor or an officer of the company to be the version currently in force and as filed with the Registrar of Companies.

4.3 The guarantee may be unlimited or limited to a specified sum. An unlimited guarantee is given for the total tax liabilities without specifying the amount. Where the migrating company has an associated UK resident company of sufficient substance the Commissioners for HMRC will normally look for an unlimited guarantee from that company. Where the guarantee is given by a company not associated with the migrating company, usually by a bank, the Commissioners for HMRC understand that the guarantor will require the guarantee to be limited to a specified sum. Under FA 1988 section 130(4) any dispute as to the amount can be referred to the Special Commissioners.

4.4 Where it is not possible for a guarantee in 1 of the forms indicated above to be provided, other arrangements may be acceptable. Further information is available from the above address.

5. Date of migration

5.1 The Commissioners for HMRC will act as speedily as possible to approve the arrangements but the time required will depend on several factors. If possible the intended date of migration should not be less than 2 months from the date of the notice. If it is necessary to agree values of assets in order to estimate tax liabilities, the time required may be longer and companies should take this into account. However, where an unlimited guarantee is proposed, it will not usually be necessary to estimate the tax liabilities in detail and it may then be possible to approve the arrangements well within 2 months of the notice.

5.2 A company may decide to change the intended date of migration either for its own reasons or because, for example, the arrangements will clearly not be approved in time to meet the original date. It should then give notice under FA 1988 section 130 of the amended date and provide details of any consequential changes in either the amount of tax and interest to be included in the arrangements or the nature of the arrangements themselves.

6. Non-compliance

Where a company migrates without the requirements of section 130 being met, the persons responsible, including individual directors, may be liable for substantial penalties under FA 1988 section 131. Where tax liabilities of a migrating company remain unpaid, those liabilities may also be recovered from related companies, or from certain directors, under section 132.

7. Telephone enquiries

An initial enquiry may be made to Corporation Tax International and Stamps (Business International) on Telephone: 03000 534690 - callers should ask for CT and VAT, International (Company Migrations).

Note: this statement is as it appears in HMRC’s Statements of Practice (March 2009).