is to press ahead with plans to charge non-domiciled nationals new
taxes despite broad pressure from business and banking industry
leaders to change course, but he has made some significant
concessions.
In his budget, the chancellor confirmed that non-doms who have
lived in the UK for seven of the past ten years will have to pay
£30,000 ($59,000) a year to keep their privileged status.
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The concessions are being made after warnings that there would be
an exodus of these wealthy foreign nationals, badly damaging the UK
economy and favouring lightly taxed jurisdictions like Switzerland
and Monaco.
In the concessions, offshore income and capital gains in offshore
trusts will be taxed only when non-domiciliaries remit them to the
UK. This will be the case even when the gains come from UK-based
assets, such as property. Regarded as a significant change, it
means non-doms will be able continue to invest in UK assets through
offshore trusts.
Darling also disclosed that non-domiciles should be able to offset
the annual £30,000 charge against tax in other countries, notably
in the US whose citizens are taxed on a worldwide basis.
The exemption for non-doms is being doubled so that those
individuals with offshore income and gains of £2,000 will not pay
the annual £30,000 charge.
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By GlobalDataThe government has also watered down its proposed changes to the
residence rules. HM Revenue & Customs has the discretion to
disregard days involved in arrival and exit travelling in
calculating days of residence in the UK for tax purposes. This
means, for example, non-residents can fly in on a Wednesday and
leave on a Friday and it will count as one day for tax
purposes.
However, the government has not made any more changes to its
contentious new capital gains tax regime, which comes into force on
6 April this year.
In reactions to the measures, Louise Somerset, tax director at RBC
Wealth Management, said: “Although some of the worst and most
retrospective plans have been reversed, we do not think that this
will prove to be enough to undo the damage that has already been
caused.”
RBC estimates that 75 percent of non-dom clients are considering
their options with a view to leaving the UK because of the
measures. “The overall message that we have picked up from our
non-dom clients is one of loss of confidence in the government in
view of the chaotic way in which the ‘reforms’ have been
introduced,” Somerset said.
Mark Summers, private client partner at City of London law firm
Speechly Bircham, said: “For clients, perhaps the most significant
statement is that there will be no further changes to the residence
and domicile rules for the life of this Parliament and the
next.”
Summers declared that the way the government has “dithered and
backtracked” in its proposals led to clients wasting professional
fees. “This reassuring message,” he said, “in respect of the future
stability of the tax system should go a long way towards repairing
the damage and encouraging non-domiciles to come to or remain in
this country.”
