Non-Domicile
Currently individuals resident but not domiciled in the UK are only chargeable to offshore income and capital gains to the extent that the income or gains are remitted to the UK. For the purpose of quantifying presence in the UK for residency purposes the days of arrival and departure are ignored. For inheritance tax purposes individual's acquire a 'deemed' UK domicile it they have been resident in the UK in 17 of the last 20 tax years prior to the relevant event, such as death.
The proposed changes will:-
a) Impose an annual charge of £30,000 for the privilege of preserving the 'remittance basis' of taxation in relation to offshore income and gains once an individual has been UK resident for tax purposes in 7 years.
b) For the purposes of quantifying presence in the UK, days of arrival and departure will be counted.
c) The changes are to take effect from 6/4/2008.
Additional issues are as follows:-
a) There is already talk that the 7 year period of grace may be reduced or withdrawn.
b) There is nothing in the press releases concerning inheritance tax. It appears to me therefore that it may be possible for individuals to be non UK domiciled for inheritance tax but subject to UK tax on offshore income and gains on an arising basis because it is not financially viable to pay the £30,000 to retain the remittance basis of assessment.
c) It would not surprise me if subsequently HM Revenue then sought to align the Inheritance Tax treatment with that applying to income and gains. This will effectively produce a 'deemed domicile' after 7 years instead of 17.
Authors Robert Arnold ( Source IFA ) and Andy Kirby (Moore Blatch Solicitors)
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