In his October 2007 Pre-Budget Report, the Chancellor announced a number of now highly publicised changes to the UK tax rules for non-UK domiciled UK resident individuals, commonly known as “non-doms”. HM Treasury has published a consultation document and draft legislation which set out in more detail how it is envisaged the changes will be implemented from 6 April 2008. Whilst some of the changes will only affect individuals who have been resident in the UK for a number of years, others will have an impact on all those coming to the UK, including international secondees etc.
These changes include an annual charge of £30,000 to use the remittance basis, the removal of the entitlement to income tax personal allowances for those who use the remittance basis, changes to the residence rules with regard to days of arrival in and departure from the UK, and the removal of a number of “flaws and anomalies”, and substantial changes to the taxation of capital gains in non-UK companies and trusts.
An annual charge to use the remittance basis
The £30,000 annual charge applies to who have been resident in the UK for longer than seven out of the past ten years who wish, in any tax year, to claim the remittance basis. Broadly, the remittance basis means that income and gains realised outside the UK are only taxable in the UK when brought (remitted) to the UK.
Individuals will have a choice each year as to whether or not to pay the charge and claim the remittance basis. The Treasury suggests that only those with unremitted income of £80,000 or more are likely to choose to pay the charge.
Personal allowances – income tax
From 6 April 2008, individuals who claim the remittance basis in any year will no longer be entitled to income tax personal allowances for that year.
Changes to the residence rules
Currently, only whole days spent in the UK are counted towards establishing residence, and days of arrival and departure are generally ignored. From 6 April 2008, these days of arrival and departure will count as a day of UK residence, significantly reducing the time an individual can spend in the UK before becoming UK resident and thus possibly liable to UK tax on worldwide income and gains.
“Flaws and anomalies”
A number of techniques, previously accepted by HM Revenue and Customs will be closed from 6 April 2008. These include ceased source planning, and the use of a number of offshore trust and company structures which are regularly used to bring overseas income and gains into the UK with no UK tax.
Act now
It is essential that all non-UK domiciliaries who are, or are potentially resident in the UK, seek appropriate professional advice now, to understand the potential impact of and plan for, the new rules. It is widely reported that a number of non-doms will simply leave the UK, even this will require careful planning. Vantis will be submitting representations to the Treasury on these new rules, we would like to ensure your views are represented. The draft legislation has been published, just as we are going to press. We are reviewing this now: further details to follow soon.
If you wish to discuss how the changes affect you in more detail, please contact Freddie Huxtable using the online form below. You may also want to read our selection of frequently asked questions.