On 22 March 2012 the European Commission formally requested the UK to amend its corporate exit charge legislation.
When a company ceases to be resident in the UK, a corporation tax accounting period comes to an end, and s 185 TCGA 1992 imposes an exit charge on unrealised gains. This rule does not, of course, apply if a company relocates within the UK.
The commission considers that such exit charges
“…may breach the freedom of establishment as [it makes] it more expensive to transfer a company seat or place of effective management to another Member State that to another location in the UK.”
If the UK is forced to change s 185, planning opportunities may arise in cases where it is more tax-efficient to relocate a company to another more favourable jurisdiction within the EU. However, the many practical issues in connection with relocation would, of course, still need to be addressed, and no doubt there would be a raft of anti-avoidance legislation to contend with.
The UK has been given two months to respond. Watch this space.