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.

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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.

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