The Conservative Party’s surprise majority victory in the UK General Election will allow the new government to press ahead with its promise to make greater efforts to counter tax avoidance and evasion. Here are 11 points that highlight what this means for those claiming non-domicile tax status.
- The UK tax office has recently introduced a number of measures to tackle tax avoidance and evasion, which will mean HMRC is likely to be spending more time and resources in investigating people, rather than helping “little” people be compliant.
- HMRC has introduced new software called “connect”, which connects up various bits of data, e.g. a person owning property either in the UK or abroad. This allows HMRC to find out about a person’s foreign properties, and then to compare this to the tax return to find out if they are declaring their rental income or not.
- UK-Swiss and UK-crown dependencies agreements. These agreements mean that income can be exchanged with the UK, so that data is with HMRC, which can lead to enquiries.
- The common reporting standard coming into force over the next few years, which means the automatic exchange of information, which will result in more data for HMRC.
- At present, the Lichtenstein Disclosure Facility (LDF) gives people a way out if they want to become compliant. The current facility is being closed, but what it will be replaced with, will not be so generous. This can be counterproductive, as the more penal the regime, the more impetus there is to either ignore the problem or leave the country.
- The government is already squeezing non-doms. The Remittance Basis Charge (RBC) has gone up from £30k/£50k to £30k, £60k, and £90k for long-term visitors.
- HMRC has consulted on extending the RBC to elections that have to last 3 years, so it won’t be possible to elect in and out on an annual basis. This will be expensive as previously a non-dom could orchestrate a taxable event in one year, so pay £50k. If these policies go through, it could be as much as 3 lots of £90k so £270k – a big jump from £50k.
- HMRC would like to encourage more foreign investment by non-doms with Business Investment Relief, but take up has been low.
- It is likely that there is an ongoing government consultation on how people claim non-dom status, including people who inherit non-dom status from their father, while still being born in the UK. But this is a double edged sword – yes you do end up with some non-doms in the UK, but the reverse is true that UK non-doms with UK fathers find it difficult to shed their domicile of origin, even if they go abroad.
- There could also be a crackdown on British people who claim domicile of choice abroad, but who are not actually living abroad. The HSBC saga has brought this into the open.
- Residency is an issue. The Statutory Residency Test came in a few years ago, so there are more prescriptive rules on whether you are resident or not.
Read the full article in International Adviser here.