With the Conservative Government on course for re-election the UK is open for business for foreign investment.
It will come as a great relief to many that Labour’s sweeping proposals to reform the tax regime for foreign domiciliaries or “non-doms” will now be quashed, at least for another five year Parliamentary term.
For the next Parliament at least, non-doms can continue to avoid paying UK taxes on un-remitted foreign income and gains by claiming the “remittance basis”.
Long term non-dom visitors will still be able to claim the remittance basis, but from 6th April this year it has become more expensive. Non-doms who have been UK resident in 7 out of the last 9 years will continue to pay a remittance basis charge (“RBC”) of £30,000 per year. However, the fee will increase to £60,000 for those persons who have been UK resident in 12 out of the last 14 tax years and £90,000 for those persons who have been UK resident in 17 out of the last 20 tax years.
Recently, HM Revenue & Customs has consulted on changing the rules on claiming the RBC, from an annual election to an election which lasts three years. This means that the RBC is guaranteed to be paid three times. However, careful tax planning using offshore trusts and offshore financial products can mean that the RBC need not be paid. Contact us for more details.
We should also be mindful that during the run up to election day the former Chancellor, George Osborne, announced that the Conservative Party was also considering its own (albeit considerably less drastic) reforms to the existing non-dom rules.
Although very little detail is currently available, most sources suggest that any new policies are likely to be aimed at “weeding out” claims to foreign domicile status that are perceived to be less meritorious. In particular, it is thought that changes could impact individuals who were born in the UK and have lived here all of their lives but, under the current rules, have “inherited” non-dom status from their father at the time of their birth.
These proposals would require amendment to the rules which determine an individual’s domicile of origin (or domicile of dependency), both of which are currently determined by reference to a significant body of case law. At present, there is no statutory definition of domicile but this would presumably change if the Government moves ahead with these proposals.
In recent years, proposals to change the non-dom regime have been accompanied by a consultation period. This usually gives professional advisers a clearer idea of how the legislation will be amended, and also provides an opportunity for interested parties to comment. Therefore, we would recommend that individuals who may be affected take a “wait and see” approach and avoid taking any action until more is known.
Once more detail is available, it may be sensible for a number of taxpayers to revisit their non-dom status and seek professional advice on this. In cases where there are legitimate concerns over the ability to claim non-dom status, under the new rules, it is likely that there will be some window of opportunity for well-advised taxpayers to restructure their affairs as appropriate.
If you would like to discuss the topics in this e-mail further, please do not hesitate to get in touch with your usual adviser from Mark Davies & Associates.