What’s next for Non-Doms?

Looking ahead to the spring budget there is a feeling of déjà vu and that we have been here before when it comes to speculation and hints of changes to the rules around UK Non-Dom status. We spoke to Lisa Spearman and Alice Pearson to gather their insights on the recent media coverage regarding non-domiciled individuals and to discuss their perspectives on what to expect in the upcoming budget. 

Whether the government is just putting the feelers out to test the temperature and the appetite for change, whether they are planning to go all out and make changes which will be implemented in April this year (yikes) or possibly next (more realistic), or whether they decide to hold a consultation with a few tweaks around the edges. We wait with bated breath.

The key point of concern is that if changes are made, they should be properly considered, they do not frustrate tax compliance and they should certainly not be a knee-jerk political decision which then requires complex legislation to introduce or contains loopholes which make a mockery of it.

From the perspective of those of us with clients who are a Non-Dom here in the UK, because they live and or work here then we need to ensure we have consistency so that people can make plans, pay their taxes and live their lives.

What we don’t want is to do is discourage people from investing in UK PLC because they see complicated and burdensome tax rules, especially when so many other jurisdictions just seem to get on and do it better. We also don’t want to see a scramble of people trying to sell up and leave the UK probably never to return. Those of more modest means who don’t have the international mobility will be most affected. The government could use this opportunity to simplify tax reporting.

The truth of the matter is that many people with Non-Dom status are more concerned about UK Inheritance Tax at 40%, for estates over £325,000 especially when several countries don’t have a comparable tax at all, like, Australia and Austria.

The area which seems to cause the most issues politically is the remittance basis. As a reminder, the remittance basis is an alternative basis of taxing foreign income or gains, and it only applies to you if you are UK resident but not domiciled or not deemed domiciled in the UK and you have foreign income or gains in a tax year.

Under the remittance basis, you can choose whether to be taxed in the UK on your income and gains worldwide as they arise (by default) or to be taxed only on the amount of foreign income and gains that you bring in, or remit, to the UK.

When you choose to use the remittance basis you must pay a Remittance Basis Charge (RBC), unless you meet certain conditions.

The RBC covers:

• If you are resident in the UK for 7 out of the previous 9 tax years, the RBC is £30,000pa
• Non-doms resident in the UK for 12 out of the past 14 years pay a charge of £60,000pa
• Once you have been resident for 15 out of the previous 20 tax years, non-doms are deemed UK domiciled and can no longer access the remittance basis.

Two areas of our concern around RBC are if the current seven year out of nine years period is reduced. We’ve seen speculation that it could drop to four years, and four years is not very long, and it takes a lot of effort to make sure people don’t infringe on the existing rules.

Secondly what transitional protection will Non-Doms have if there are major changes to RBC so there is time to move from one system to another. With just three weeks of the current tax year left after the budget there just simply isn’t enough time to check everyone’s status and ensure compliance.

There is also the longer-term danger that the government could end up losing out on both UK tax, the remittance charges and end up antagonising people because of the lack of tax treaties in place with many jurisdictions, for example Brazil.

Ultimately people just want consistency and a fair implementation of the tax system rather than a complete overhaul. Roll on budget day and let’s see what hand the chancellor deals for us all this time.

To discuss your tax status, please contact Lisa Spearman, Alice Pearson or a member of the private client team.