Save content
Have you found this content useful? Use the button above to save it to your profile.
AIA

Residence and domicile: Further details and new proposals

by
18th Jan 2008
Save content
Have you found this content useful? Use the button above to save it to your profile.

HMRC is publishing today more detail on the amendments to the residence and domicile tax rules which were announced in the 2007 Pre-Budget Report. The documents published today are:

  • draft legislation covering day counting and the remittance basis of taxation (including the £30,000 charge and personal allowances for those claiming the remittance basis);
  • explanatory notes in relation to this draft legislation;
  • a number of frequently asked questions and corresponding answers explaining the proposals.

The documents are part of the HM Treasury consultative document 'Paying a Fairer Share - a consultation on residence and domicile' which was published on 6 December 2007.

The new provisions will make a series of changes to the current rules:

  • the residence rules will be amended, so that days of arrival in and departure from the UK will count towards establishing residence;
  • individuals who are resident but not domiciled, or not ordinarily resident, in the UK will be required to make a claim in order to access the remittance basis of taxation for income and chargeable gains unless their unremitted foreign income and gains are less than £1000 . Individuals who opt for the remittance basis will lose their entitlement to personal allowances and the capital gains tax annual exempt amount;
  • individuals who are resident but not domiciled, or not ordinarily resident, in the UK for longer than seven out of the past 10 years will only be able to access the remittance basis of taxation on payment of an annual charge of £30,000, unless their unremitted foreign income and/or gains are less than £1,000;
  • the current rules will be amended to remove flaws and anomalies that allow individuals using the remittance basis to avoid paying tax on foreign income and gains where it is properly due.

The amendments in the draft legislation are to be put before Parliament in the 2008 Finance Bill. Subject to the Bill becoming law they will (broadly) take effect from 6th April 2008. HMRC note that the draft legislation published today is not in its final form. It says that “Further amendments will need to be made to it, so it should be regarded as work in progress.”
The deadline for responses to the consultation document is 28 February 2008 but comments on the draft legislation will be accepted beyond this date.

Tags:

Replies (7)

Please login or register to join the discussion.

avatar
By User deleted
03rd Feb 2008 11:32

Residence Rules -confusion over CGT
I have just read the Revenue FAQ’s highlighted above. Helpful but I am still a little confused. If it moves, tax it seems to be the principal.

Could not find out answer/clarification to my question.

Currently a non resident, who is also non ordinary resident and non domiciled, can have an investment (say property in the UK) and NO CGT will arise on disposal.

Am I correct that such individuals will not be affected from 5 April 2008?

If they are, than they need to consider disposing of investment before 5 April 2008 to avoid CGT.

Thanks (0)
avatar
By carnmores
19th Jan 2008 15:01

Marvellous
we have gone from the right amount of tax to a fairer share in one giant leap . mmmmmmmmm

Thanks (0)
avatar
By aakhanna
22nd Jan 2008 12:29

Residence Rules
These are pretty drastic rules.

Can anyone give clarity here - A British Citizen , non-domiciled in UK, lived and worked in UK up until April 2003. He has declared himself non-domiciled in the tax return forms etc and Revenue has not contested this . He has lived overseas outside Uk since April 2003 and has not stayed in UK for more than 90 days during any one year in the last 4 years .

He has a house co-owned with his wife in UK which is rented and income is offered to tax in respect of rent in Uk and interest thereof.

How is he affected by the proposed change.
Regards

Thanks (0)
avatar
By verstage
24th Jan 2008 15:47

more complicated than you think!
There's certainly going to be a lot of people needing the services of the UK accountancy profession!
Take for example Mr.Okavango, who works as flight crew for Air Zimbabwe. He overnights at Heathrow once a week, so will spend, say, 100 "days" in the UK in 2008/9. But in each of the years 2006/7 and 2007/8 he spent 131 days in the UK completing his commercial pilot training. So he will be UK tax resident from 2008/9 under the 90 day rule, and presumably liable to pay UK tax on his world wide income. The double taxation agreement between UK and Zimbabwe has been supended. He bought a piece of land 10 years ago for 5,000ZIM dollars . He sells it for $5,000,000,000 or whatever. You have to calculate the tax due to HMRC. Do you take the official exchange rate, or the black market exchange rate? Do you take the morning rate or the afternoon rate - makes quite a difference when you're talking about hyperinflation. And when HMRC issues an assessment how is he going to pay? There is strict exchange control, and black market currency dealings are a criminal offence. Will HMRC not bother to issue an assessment? If not, why not? The law is the law, after all - you can't let some people off and not others.
I think the 90 day rule is going to be unworkable - why not make it about 180 days like in France, Spain, Germany etc?

Thanks (0)
avatar
By User deleted
22nd Jan 2008 14:13

Amitabh
Your individual would appear from what you say to be non-resident in the UK at present, however, there may be other factors which could influence this the other way. Then it might be very sensible to double check the day count which establishes that visits are for less than 90 days over the last 4 years. If he is living and working full-time abroad and his family are with him abroad with him he would normally be classed as non-resident (day count permitting). A good case to read on this is Robert Gaines-Cooper, he was an individual who claimed to have left the UK, but was found to have remained due to family, ties, etc.

Thanks (0)
avatar
By User deleted
24th Jan 2008 10:47

Could start to get complicated..?
When were the rules ever simple?

Joking aside, it is not in HM Govts interest to make the rules easy now is it?

Thanks (0)
avatar
By verstage
23rd Jan 2008 22:43

New way of counting days will affect large numbers of people
If spending a night in the UK will as from 5th April count as 2 days presence, then a lot of new people are going to become UK tax resident under the 90 day rule.
For example, pretty much all international lorry drivers who make a weekly trip to the UK. There must also be hundreds of tour guides, couriers etc who visit the UK on a weekly basis and overnight there. And is there a special rule for long-haul aircrew arriving on a weekly basis and resting overnight? Many of these will come from countries with no double taxation agreement with the UK, with different tax year ends etc. Could start to get complicated . . . .

Thanks (0)