Residence and domicile

Stephen Hignett, Tax Partner, CMS

On balance, the Budget contains mostly good news for non-doms.

Higher remittance basis charge for long term residents

Non-doms who have been UK resident for 12 years or more will, from April 2012, pay an annual charge of £50,000 (up from £30,000) in order to be taxed on the remittance basis.  Whilst this is obviously unwelcome, it is a relatively small price to pay in the circumstances; we assume it is a token gesture offered to the Liberal Democrats by their coalition partners to avoid the need to make more radical changes to the non-dom regime which the Lib Dems had proposed.

Tax relief for remitting to invest in the UK

Non-doms will welcome a new relief which will allow them to remit amounts to the UK without triggering tax liabilities provided that they use those funds to invest in UK businesses. We will be interested to see the details of this new relief but, on the basis that the idea behind retaining the UK’s generous remittance rules is to attract wealth to the UK, this seems like a very sensible idea.

Simplifying the administrative burden

The Government has acknowledge what has been plain to advisers and taxpayers for some time – that the rules introduced in 2008 have created an administrative burden on non-doms which is almost impossible to comply with.  It will introduce reforms to remove the undue administrative burden, although it has not indicated which areas will be targeted.  It will have a broad range of areas to choose from and any simplification of the way in which these rules operate will be welcomed by taxpayers and HMRC alike.

New statutory residence rule

The Government has also acknowledged wide-spread criticism of the current rules on the residence of individuals which are based primarily on case law. It will consult in May of this year with a view to introducing a statutory residence test in April 2012 to provide greater clarity and certainty to individual taxpayers.  While this aim is commendable, achieving it is likely to prove difficult.

Stability of the tax regime for non-doms

Whilst the changes announced in this Budget follow wide-spread changes to the remittance rules for non-doms made in 2008, we would appear to have confirmation from the Government that no further changes will be made during the term of the Government.  Being able to assure clients that there will be no further changes to this regime for the next three years is very welcome indeed.

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