 April
2008
Update on Residence and Domicile
The government will implement a package of reforms
announced in the 2007 Pre-Budget Report subject to
certain changes. The measures will take effect from
6 April 2008.
The main proposal is that UK residents who are non-domiciled
or not ordinarily resident, who wish to continue to
be taxed on a ‘remittance basis’ rather
than on their worldwide income and gains, will have
to pay an annual tax charge of £30,000 on unremitted
income and gains. Those with unremitted foreign income
and gains of less than £2,000 will however be
exempt from this charge.
The charge will apply if an individual has been resident
in the UK for at least seven out of the previous ten
tax years. Individuals will be able to decide each
tax year whether to pay the charge and be taxed on
the remittance basis or be assessed on their worldwide
income and gains.
Key changes include:
- users of the remittance basis will lose their automatic
entitlement to certain allowances, such as the personal
allowance and the capital gains annual exemption
(unless the £2,000 de minimis applies)
- children will not pay the £30,000 charge
- the £30,000 charge should be creditable
against foreign tax
- art works brought into the UK for public display
or for repair and restoration will face no new tax
charges
- income and gains in offshore trusts will only be
taxed when they are remitted to the UK, even if these
come from UK assets
- changes will be made to the current rules on remittances
to restrict the ability of individuals to sidestep
UK tax on income and gains where HMRC believe it
is due.
In addition, from 6 April 2008, when determining if
an individual is resident in the UK, any day where
the individual is present in the UK at midnight will
be counted as a day of presence in the UK for residence
test purposes. There will be an exemption for passengers
who are temporarily in the UK whilst in transit between
two places outside the UK.
Please do get in touch if you want any further advice
in this area.
Internet Link:
HMRC
residence and domicile guidance |
