STEP Welcomes Treasury Announcement on Non-Domicile Taxation and Statutory Residence Test

STEP has welcomed today’s announcement of the government’s plans to reform the taxation of non-domiciled individuals and its stated intention to introduce a statutory definition of tax residence.

The reforms to non-domicile taxation will be included in Finance Bill 2012. This comprises the introduction of a higher £50,000 annual charge, a new relief to encourage business investment and technical simplifications to some aspects of the existing non-domicile rules.

The Government also announced that it will legislate the statutory residence test in Finance Bill 2013 to take effect from April 2013 rather than April 2012 following a further period of consultation.

George Hodgson, Head of Policy at STEP, said: “We welcome the proposals set out today in principle, but still feel that they do not go as far as is required to reduce the complexity of the rules or to stop non-domiciliaries (especially those thinking of coming to the UK) from feeling unwelcome, and driving those who are already here away.”

“With respect to a statutory definition of tax residence STEP has always advocated a pure day count test and whilst we would have preferred this type of test, we agree that the government’s commitment to the form of test set out in the consultation document would be a great improvement on the current situation in many respects.”

STEP will continue to positively engage with the Treasury on these matters until they are enacted.

ENDS

Notes to Editor

STEP responded to the HMRC consultation on the Statutory Residence Test and Non-Dom rules in June 2011

Statutory Residence Test

STEP has long been of the opinion that the current uncertainty surrounding tax residence in the UK is unsatisfactory. It acts as a disincentive to those considering coming to the UK whether for business, work, pleasure or with a view to investing here. The uncertainty of the current rules also makes it difficult to advise many of those exiting the UK when they have become non-UK resident for tax purposes. STEP advocates a pure day count test and notes that the consultation document gives no reasons for not adopting this approach.

Wendy Walton, chairman of STEP’s UK Technical Committee, said: “A statutory residence test is capable of being a simple and objective test such as those widely used by other countries. While STEP would have preferred the simplicity of a day count test the proposed changes should give clients much needed certainty and improve our international competitiveness.”

Non-Domiciled Rules

STEP believes that the rules should be easy to comply with and should not necessitate extremely onerous accounting mechanisms to be put into place in order to comply. In relation to the remittance rules contained in FA 2008, we consider that the way in which the remittance rules currently operate acts as a disincentive to investment in the UK and we are glad that the Government has now recognised this.

Regarding the non-domiciled rule proposals Wendy Walton said: “We welcome the proposals set out in the consultation document in principle, but feel that they do not go as far as is required to reduce the complexity of the rules or to stop non-domiciliaries from feeling unwelcome, and driving those who are already here away.”

For the full response to each consultation, please see:

Reform of the taxation of non-domiciled individuals: a consultation issued by HMT/HMRC in June 2011 (PDF File)

Statutory definition of tax residence: a consultation HMT/HMRC consultation document issued on 17 June 2011 (PDF File)

For further information, please contact Scott Devine on scott.devine@step.org or call 020 7340 0529

The Society of Trust and Estate Practitioners (STEP) is the worldwide professional body for practitioners in the fields of trusts and estates, executorship and related issues. STEP aims to promote the highest professional standards through education and training leading to widely recognised and respected professional qualifications. STEP also works to demonstrate the value of good stewardship and planning across future generations to governments, professionals, financial institutions and the public. STEP internationally has over 16,500 members, with over 6,000 members in the UK. Over 4,000 students worldwide are currently studying for STEP qualifications and in the UK STEP supports an extensive regional network providing training and professional development.