Introduction »

Changes ahead for non-doms

The tax treatment of non UK domiciled individuals is by no means straight forward .The starting point of liability for all non UK domiciles is that overseas income and gains are taxable on the arising basis just as they are for any UK domiciled individual.

The non UK domicile then has the option of making a claim for the ‘remittance’ basis to apply, meaning that they are only assessed on overseas income and gains treated as received in the UK. However, if they make this claim, they will automatically forfeit their personal allowance for income tax purposes and their annual exemption for CGT. This will obviously impact on their total tax liability which also includes all UK income and gains.

Matters become more complex and serious when an individual falls within the definition of a long term UK resident. This will arise when the individual has been resident in the UK in seven out of the nine UK tax years preceding the one for which liability is being considered. If they have been UK resident for at least seven of those years then they will be classed as a long term resident for the purpose of the remittance basis.

Essentially the long term resident (who must be 18 years of age or over at some time in the tax year concerned) can only claim the benefit of the remittance basis (with minor exceptions) if they pay an additional £30,000 in addition to the tax on any income or gains remitted. This sum is known as the ‘remittance basis charge’ (RBC).

The Government is now consulting on measures to introduce the following additional reforms from April 2012.

The measures will:

• remove the tax charge when non UK domiciles remit foreign income or capital gains to the UK for the purpose of commercial investment in UK businesses
• increase the existing £30,000 annual charge to £50,000 for non-domiciles who have been UK resident for 12 or more years and who wish to retain access to the remittance basis of tax and
• simplify some aspects of the current rules to remove undue administrative burdens.

The Government has confirmed that there will then be no other substantive changes to these rules for the remainder of this Parliament.

If these proposals are likely to have an impact on you and you would like to discuss the position as it affects your personal circumstances please do contact us.

Introduction »