Last year HM Revenue & Customs launched the Offshore Disclosure Facility to enable those with undisclosed interest from offshore bank accounts to come clean and report the omissions and pay the tax, interest and a 10% penalty.

Before the facility closed on 26 November 2007 it was being reported that the facility had not been as successful as the Revenue had hoped.

Today the Revenue are implementing the second phase of the attack on offshore account holders by issuing letter to around 5,000 account holders who did not come forward last time. This time, as well as having to pay the tax and interest the Revenue has stated that any penalty is:

“..unlikely to be less than 30%”

If you are in the position of having undisclosed income you should seek professional advice as soon as possible. Next time it could be the maximum penalty of 100% of the tax or even a criminal investigation.

• Print
• Comments
• Trackbacks

Currently Non-doms do not get the benefit of capital losses on foreign assets as the remittance basis is compulsory for capital gains tax. From 6 April 2008 it will be possible to elect in and out of the remittance basis on a year by year basis.

Legislation will be amended so that Non-doms who have not claimed the remittance basis from 2008/09 will get relief for foreign losses. Those non-doms who do claim the remittance basis will be able to elect into a regime that gives them relief for foreign losses in the UK in the years they are taxed on an arising basis. The election will be irrevocable and will require disclosure of unremitted capital gains.

• Print
• Comments
• Trackbacks

There have a number of changes announced in today’s Budget to the proposed levy of £30,000 for taking advantage of the remittance basis.

The first change to note is that it will only apply to adults. Children will not have to pay the charge until the year in which they turn18. Secondly the de-minimis limit of £1,000 has been raised to £2,000.

The most significant change is that it will now a tax charge rather than a stand alone charge and, as a result, will be treated as such for the purposes of Double Taxation Agreements. This follows serious lobbying by the, particularly American, ex-pat community as it looked like US citizens would not get credit for the £30,000 against their US tax liability.

The charge will be attributed to unremitted income or gains (at the choice of the individual) and when these are eventually remitted to the UK they will not be taxed again. However there will be ordering rules that will ensure that untaxed unremitted foreign income and gains will be treated as remitted before income or gains upon which the £30,000 has been paid.

The £30,000 charge will also be available to cover Gift Aid donations.

• Print
• Comments
• Trackbacks

Today’s Budget has relaxed the proposed rules for counting the days spent in the UK when determining whether someone is resident in the UK for Tax purposes. It had previously been announced that days of arrival and departure would be counted.

Today’s announcement means that only days where the individual is present in the UK at midnight will be counted as a day of presence in the UK for residence tax purposes. That is days of arrival but not departure.

There is an additional exemption for passengers in transit between two places outside the UK even if they are here at midnight.

Further details can be found here.

• Print
• Comments
• Trackbacks

On 12 February 2008, Dave Hartnett, the Acting Chairman of HMRC, published an open letter which sought to provide additional clarification concerning the Government’s proposed reforms to the tax treatment of non-UK domiciliaries with effect from 6 April 2008. He implied that, notwithstanding 26 pages of draft legislation, 24 pages of explanatory technical notes and 33FAQs, the Treasury’s aims had been widely misunderstood.

One of the welcome points which he mentioned was the following statement:

“Money brought into the UK to pay the £30,000 charge will not itself be taxable.”

It now transpires that this is not the full story. In order for such a remittance not to be caught for UK tax purposes in 2008/09 and later years, the cash in question must be paid direct to HMRC by electronic transfer or by a cheque drawn on a foreign bank account. If the sum is first paid into the non-UK domiciliary’s UK bank account for on-payment to HMRC, that will constitute a taxable remittance (so that, for a higher rate taxpayer, £50,000 would be required rather than just the £30,000).

Dave Hartnett’s letter should have made this clear.

• Print
• Comments (10)
• Trackbacks

The Telegraph is reporting a further climb-down on the proposed changes. According to senior HM Revenue and Customs officials.

“…non-doms will now be able to elect to make a "deemed sale" to rebase the value of their British and overseas assets.”

This appears only to relate to assets held with in offshore trusts and seems to have arisen following the letter from Dave Hartnett which stated…

“….there will be no retrospection in the treatment of trusts and the tax changes will not apply to gains accrued or realised prior to the changes coming into effect.”

No official announcement has been made and none is likely before the Budget on 12 March. So, if the trustees of your offshore trust were considering a “bed & breakfasting” exercise before 6 April 2008 they may want to put it on hold until the Budget.

• Print
• Comments (2)
• Trackbacks

There have been a number of tax cases recently regarding the question of residence in the UK for tax purposes. In both the Gaines-Cooper and Barrett cases HM Revenue & Customs established that the taxpayers remained resident in the UK. In a recent case heard before the Special Commissioners concerning a British Airways pilot the Revenue were unsuccessful. Full details of the case can be found here.

• Print
• Comments
• Trackbacks

Following my blog of yesterday it now appears that the Chancellor has retreated on some of his proposals for the taxation of Non-Doms. Dave Hartnett, the Acting Chairman of HM Revenue and Customs has posted a letter on the Revenue website to clarify the Government’s intention in four areas where concerns have been raised.

According to the letter Hartnett wants….

“to make clear that the Government’s intention – which will be set out in legislation to be brought forward – has always been to ensure that:

• those using the remittance basis will not be required to make any additional disclosures about their income and gains arising abroad. So long as they declare their remittances to the UK and pay UK tax on them, they will not be required to disclose information on the source of the remittances; 
• there will be no retrospection in the treatment of trusts and the tax changes will not apply to gains accrued or realised prior to the changes coming into effect;
• money brought into the UK to pay the £30,000 charge will not itself be taxable;
  
  and
  
• it will continue to be possible to bring art works into the UK for public display without incurring a charge to tax.
  
  In addition, we will continue to discuss with the US authorities how the £30,000 charge can become creditable against US tax.”
  
  

The full text of Hartnett’s letter can be found here.

This clarification is being interpreted as a retreat or a climb down by the Chancellor. However, a Treasury spokesman has been quoted as saying that the intentions have not changed it is just that the draft legislation has gone “slightly awry”. There are still a number of issues to be resolved and I expect we will have to wait until the Budget on 12 March to get further details.

Keep on watching this space.

• Print
• Comments
• Trackbacks (1)

As the Chancellor’s proposals on taxing the so-called “non doms” (people born overseas or with foreign parentage) become clearer, it is apparent that his £30,000 annual levy is the tip of what could be a very large iceberg.

Media coverage over the past few days has highlighted the very real prospect of many non doms leaving the UK, as the potential impact of some of Mr Darling’s other ideas hit home.

• Print
• Comments
• Trackbacks

It is being reported in The Times and elsewhere that Chancellor Alistair Darling is considering a rethink on the Non-Doms changes. According to The Times officials at the Treasury are:

“…considering introducing provisions to assure non-doms that the Treasury’s aim was not to pry into their world-wide tax affairs, but only to tax the earnings they bring to Britain.”

Watch this space...

• Print
• Comments
• Trackbacks (2)

We have now had a chance to digest the draft legislation issued last week although it cannot be said to sit easily in the stomach. It is complex and retrospective in some key respects. I am chairing a working party of the ICAEW to lead its responses and meet with parliamentary and treasury representatives to lobby on our particular areas of concern. We will keep you posted of developments in this blog but it appears that the fundamental points of policy are fixed.

A detailed summary of the changes and how you might be affected are found in our latest edition of Tax Plus issued on Friday. You can read Tax Plus by clicking here.

• Print
• Comments
• Trackbacks

After some considerable wait HM Revenue & Customs and customs have finally published the draft legislation covering changes to rules for taxing UK residents who are not domiciled in the UK.

These are more wide ranging than expected and will have a significant impact on not only Non Doms but also beneficiaries and settlors of offshore trusts whether or not they are Non Doms.

• Print
• Comments
• Trackbacks

Following reports of further meetings with business leaders it now seems that Mr Darling’s long delayed announcement regarding the capital gains tax regime will not now appear until next week according to the FT.

We are also still waiting for the draft legislation for the new Residence and Domicile rules. In a little over 10 weeks both sets of new rules are due to take effect and the uncertainty makes it very difficulty to plan.

• Print
• Comments
• Trackbacks

Although January is traditionally the busiest time of year for tax professionals we are eagerly awaiting further details on the proposed changes in the rules for Residence, Domicile and Capital Gains which are rumoured to be available next week.

• Print
• Comments
• Trackbacks

The Chartered Institute of Taxation has highlighted the fact that a Private Members’ Bill (Disqualification from Parliament (Taxation Status) Bill) has been tabled in Parliament which proposes that those electing for the non-domiciled remittance basis of taxation will be disqualified from acting as an MP or Member of the House of Lords.

• Print
• Comments
• Trackbacks

Having indicated that the promised consultative document on Residence and Domicile would not be issued until the New Year it was surprising to see it appear on the Treasury website this morning.

• Print
• Comments
• Trackbacks

As I am sure you are aware the last Budget and the recent Pre-Budget Report introduced some significant changes to our tax system that will have a major impact on the tax affairs of UK resident non-domiciled taxpayers. Regrettably, many changes have been announced but without any detailed, or draft legislation; I had hoped to have more concrete information to give you but as the changes are significant it is useful to provide some general pointers now.

• Print
• Comments
• Trackbacks

Just about a year ago there was much media coverage to the Special Commissioners case of Robert Gaines-Cooper v Revenue & Customs Commissioners which highlighted the question of whether days of arrival and departure should be included when calculating whether someone is resident in the UK for tax purposes. In that particular case the Revenue said that these days should be included but subsequently announced that in most cases they would not include them. However it was announced in the Pre-Budget report that, from April next year, the rules will be changed and days of arrival and departure will be counted in future.

• Print
• Comments
• Trackbacks (2)

As the 26 November deadline for making disclosures under the Offshore Disclosure Facility approaches it has was reported last week that HM Revenue & Customs are considering a second “tax amnesty”. An HMRC spokesperson has confirmed that plans are being put in place to repeat the ‘amnesty’ that was carried out earlier in the year.

• Print
• Comments
• Trackbacks

There has been much debate since the Pre Budget Report about the proposed changes to the capital gains tax rules and the taxation of Non –Domiciled UK residents. The chancellor is meeting with business leaders today when he will be asked to scrap his proposals.

• Print
• Comments
• Trackbacks

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.

• Print
• Comments (40)
• Trackbacks

The immediate reaction to the Chancellor’s speech is that much of what he said was smoke and mirrors – The Inheritance Tax doubling of the nil rate band is not quite what it seems – 2 x 300,000 is still 600,000 so far as I know…

The capital gains tax simplification represents a significant increase in tax in a number of cases and if you are non UK domiciled and UK resident then keep checking this page. We are writing frantically as I type and a more detailed and coherent response will follow shortly….

• Print
• Comments
• Trackbacks

It has been reported by Bloomberg that Shadow Chancellor of The Exchequer, George Osborne is proposing a flat £25,000 levy on UK Residents who are not domiciled in the UK. He is quoted as saying that

“You can either register for this levy, or you can take your tax affairs elsewhere”

As Richard Murphy says in his blog this sounds like an own goal as, according to Treasury figures, the average amount of tax currently paid by non-domiciled residents is £26,800

• Print
• Comments
• Trackbacks

The BBC reports that HMRC is to expand its enquiries into offshore accounts beyond the High Street banks. Many people received letters this summer explaining that their bank had given details of customers with offshore accounts to HMRC and this process has led to the so-called amnesty which was set up for people to come forward before 22 June 2007.

It now appears that HMRC has turned its attention to other private banks and investment houses. If you receive a letter from your bank and/or HMRC about this and you have any reason to be concerned please contact us for further advice.

In the majority of cases there will be nothing to report because the account holder may be taxable only when funds are brought to the UK.

• Print
• Comments
• Trackbacks (1)

It was reported yesterday The Observer , and in both The Guardian and The Independent today that The TUC has joined the campaign to abolish the current tax rules for those resident but not domiciled in the UK.

The Sunday Times on the other hand ran a report about a poll that suggested that “two people in every five are either planning to move abroad or have seriously considered doing so”.

Maybe the new Chancellor will touch on this in his first Pre-Budget report next month.

• Print
• Comments
• Trackbacks

An article by Vannessa Houlder in the FT this morning has sparked further debate on the question of Domicile for UK tax purposes.  This was picked up by

• Print
• Comments
• Trackbacks

There has been further press coverage in the The Times online newspaper over the weekend about the taxation of non domicilaries in the UK.  The debate was sharpened when the director of the CBI, Richard Lambert, raised questions about the fairness or otherwise of the UK’s tax laws.

• Print
• Comments
• Trackbacks

Further to the post on 28 February 

the Times has now picked up on this issue about Tax Returns to include more detailed questions for non resident and non domiciled tax payers.

• Print
• Comments
• Trackbacks

Following the Gaines-Cooper case, there may be trouble in store for those who claim non-UK residence based on the number of days spent in the UK. PriceWaterhouseCooper (PwC) have highlighted that the a re-write of existing tax rules, which are due to come in effect on 6 April 2007, has made what they refer to as “significant changes” to the existing rules.

The re-write may affect taxpayers who come to the UK for a temporary purpose and those leaving the UK for occasional residence abroad. According to PwC:

“Under the existing legislation in s334 of ICTA 1988, an individual who is a Commonwealth citizen, or citizen of the Republic of Ireland, who leaves the UK for the purpose of occasional residence abroad only, is taxed if he had remained resident in the UK. The Income Tax Bill will extend this rule to anyone who, prior to leaving the UK, has been both resident and ordinarily resident. Potentially this change will bring significant numbers of expatriates, for example from mainland Europe or the US, within the scope of the rule for the first time”.

The full article frm PwC can be found on their website.  Registration to read this document is required and you can sign up here.

• Print
• Comments
• Trackbacks

A recent report has claimed that the current domicile tax laws are illegal.

The report, from Tax Research UK, claims the rules treat individuals who are domiciled outside the UK differently to those with a UK domicile.

This report was picked up by the Observer on March 4. Maybe Gordon Brown will take this into account when writing his Budget Speech

• Print
• Comments
• Trackbacks

HMRC have re-vamped the supplementary pages to the 2007 Self Assessment Tax Return which relate to Non Resident and Non Domicile issues. The revised pages have appeared in draft form on the HMRC website

Residence

Previously the tax return asked simply for the number of days spent in the UK (excluding days of arrival and departure) in a particular period. The new pages, which will be sent out with tax returns in April, ask additional questions, namely:

• The number of days attributed to exceptional circumstances.
• How many separate occasions were you present in the UK in the year, and
• How many workdays were spent in the UK

The recent Gaines Cooper case decided that days of arrival and departure should be included but HMRC subsequently announced that this would be a ‘one-off’.  However it seems clear from the revised questions that they are taking a keener interest in this area.

Domicile Outside The UK

Previously the form simply asked whether details regarding domicile had previously been submitted toHMRC and whether circumstances had changed. The revised form asks neither of these questions but instead asks:

• Whether 2006/2007 is the first year that a claim to be domiciled outside the UK is being made
• If the domicile has changed from a UK domicile of origin, on what date did it change
  Whether you were born in the UK but never domiciled here, and
• If born outside the UK when you came to live here.
  
  It appears from the last two questions that HMRC are trying to identify second generation immigrants with domicile outside the UK and those who might be ‘deemed” UK domicile. The deemed domicile rule currently has no effect for capital gains tax or income tax ( with one exception – Pre owned assets) and applies only to inheritance tax purposes. Perhaps HMRC are trying to widen the net?
  

• Print
• Comments
• Trackbacks