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Consultation opens on minimum remittance basis period for UK non-doms

Monday, 26 January, 2015

The UK government has published a consultation paper on whether a non-domiciled resident's claim to pay the remittance basis charge should apply for a minimum of three years.

The proposal was announced in the Treasury's Autumn Statement in December, along with an increase in the annual remittance basis charge for very long-term non-doms from GBP50,000 to GBP90,000.

At the moment, non-doms make an election every year as to whether they will be taxed on the remittance basis (and pay the charge) or be taxed on their worldwide income and gains, with no charge. Many change this election frequently, not least because their annual income is often volatile or because they become temporarily non-resident.

However, the Treasury suspects some of them deliberately arrange their affairs so that they only have to pay the charge occasionally. This can be done by carefully timing the bringing of income and capital gains into the UK. Some investment products, such as offshore bonds, are marketed to non-doms to promote this, according to the Treasury. It says that up to 800 non-doms paying the remittance basis charge in 2012-13 had stopped claiming the remittance basis in the past and were now claiming it again.

The aim of the minimum period policy is to prevent this. It will require non-doms who are liable to the charge – i.e. those have been resident in the UK for at least seven out of the previous nine tax years, and whose overseas earning and gains exceed GBP2,000 a year – to commit to paying it for the three-year minimum period.

The Treasury acknowledges that wealthy non-doms make a 'significant contribution in the UK, creating jobs and inward investment', and insists that it will maintain the remittance basis of taxation as a means of keeping non-doms in the country. It claims, however, that the coming sharp rise in the remittance basis charge for very long-term non-doms (GBP90,000 for those resident for 17 of the last 20 years, and GBP60,000 for those resident for 12 of the last 14 years) will encourage even more of them to organise their affairs to minimise their exposure to the charge.

The consultation paper raises several difficult questions about implementing the minimum period, such as how subsequent claim periods should be treated, and what happens when an individual stops being resident in the UK.

The Treasury is also considering whether the minimum period should be increased for long-resident non-doms. Even the three-year period itself is, in principle, up for discussion.

The consultation closes on 16 April 2015. The government intends that the minimum claim period will take effect in the next parliament, from April 2016 – subject, of course, to the outcome of the general election.