Pre Budget Report 2007 - Residence and Domicile
The long awaited attacks on the non domiciliary have arrived. Having rubbished the £25,000 levy put forward by the Conservatives, Mr Darling has announced a £30,000 surcharge for those who will have been resident in the UK for 7 years at 5 April 2008.
The £30K is in addition to the tax that would be payable on the remitted income. There will be frantic calculations as to whether the advice should be to remit now. There is no information currently on if or how that will fit with any double taxation treaties…
There are a number of detailed attacks which have a small effect but cumulatively are pernicious. From 6 April 2008 it will not be possible to combine a claim for personal allowances with the remittance basis unless your unremitted income is less than £1000 per year.
The residence rules got a lot of publicity earlier in the year and despite their protestations at the time the Revenue have now said that after 6 April 2008 the days of arrival and days of departure will be counted as days of presence in the UK. This is bad news for international commuters.
The final sting in the tail is that there are various “corrections to anomalies”. In short these are:
Stopping the manipulation of the remittance basis by claiming it one year and not the next
• Stopping the source ceasing rules
• Reducing the scope for the alienation of income or gains using offshore trusts and companies – we will wait with bated breath for that one…
• Applying avoidance measures which do not currently remittance basis users.
Some of these are are quite scary and there are potentially enormous changes to both existing arrangements and the way in which we plan for non UK domiciliaries.
A consultation is promised but it will perforce be a short one if legislation is to be introduced in FA08 as the consultation papers will not be issued to the end of the year. Far be it from us to suggest this is a cynical attempt to minimise the opportunity for anyone to consider matters properly. We will be posting further details as soon as we can.
http://www.hmrc.gov.uk/pbr2007/pbrn18.pdf.
Will HMRC address the issue of UK airport transits when considering days of arrival and departure counting towards 90 days of residence? Offshore islanders going almost anywhere have to transit through UK airports, often with an overnight stay. It will be very tough if these days are also counted.
As is often the case there was little detail in the Pre Budget Report. Whether HMRC will count “transit” days will not become clear until the draft legislation appears later this year followed by a period of consultation.
In many countries, the US, France etc.included, one could stay up to 6 months before becoming resident. Counting the days of departure and aarrival for the 90 days stay residence rule is driving business people away from the UK
If one chooses to give up the non-domicile option for one year (or more) can one then revert back to it? In other words, someone who has little offshore assets at present but expects that to change in the future may want to declare all worldwide assets (and thus avoid the £30,000) but later revert back to non-domicile status. Will that be possible?
Hi Mark
Many thanks for your comment.
We won't know until we see the rules but we suspect there will be limitations on the ability to opt out again once one has opted into worldwide taxation.
Thanks
Lisa
If a non-domicile person, decides give up the non-domicile option in 2008, and opts to declare worldwide income, is it clear how his investments and income will be taxed for the previous years of residence. i.e if he has kept separate "capital" and "income" accounts for all his years of residence, will the funds in the "income" account which have accumulated over the years all become taxable in 2008?
How about his investments. Will he have to go back over previous years records to work out what capital gains he has made from sales of shares in order to be able to declare them in his 2008 return?