1.
B CAN WE INDUCE MR PAO TO MOVE HIS SHIPPING ENTERPRISE
TO BRITAIN AND REGISTER HIS SHIPS HERE OR IN HONG KONG?
If Mr Pao were to set up a UK shipping company with its principal place of business here and transfer his ships to its ownership and to UK or Hong Kong registry his company would then become subject to UK law. It would be subject to UK corporation tax on its profits but given Mr Pao's huge building programme and the free depreciation allowed to British owners it is unlikely that he would be required to pay tax for some years, and not even then if he continued to build. He would also be subject to section 482 of the Income & Corporation Taxes Act, 1970, which forbids a UK company to migrate or transfer any part of its trade or business to a non-resident without Treasury consent. He would also be subject to UK exchange control regulations. If the ships were registered in the UK they would be subject to our regulations on equipment, manning etc. They could however be registered in Hong Kong where they would be subject to comparable but possibly less onerous Hong Kong regulations.
2. Mr Pao would therefore be subjecting himself to considerable restrictions and it is hard to see why he should wish to do this. Although he might be free from corporation tax for the time being because of his building programme, and our exchange control regulations are not particularly onerous on shipping companies, he could not be sure that the law would not be changed, and if it were changed he would have difficulty in migrating because of the 1970 Act.
3. It is possible to over-estimate the benefit which his foreign exchange earnings as a UK based company would bring to the UK economy. If he continued to build his ships in foreign yards and to crew his ships with non-UK nationals for the most part the benefit would be limited to his UK expenditure and that of his shore staffs which for his type of ship would probably be relatively small.
6.