The Government's draft legislation on tax hikes for non-domiciles, released last Friday, has dismayed tax advisers who fear economic and charitable contributions made by non-doms may disappear abroad along with fine art masterpieces.
Mike Warburton, Grant Thornton senior tax partner, described the arrangements for non-doms as a ‘dog's dinner’. He warned US bankers, said to form a large proportion of those who claim non-dom status on their tax returns, would face double tax under the rules, because the charge was unlikely to be ‘creditable’ under US rules taxing worldwide income.
Warburton suggested that as the charge would not be a percentage of income or a gain, it would not count as a tax under US rules.
Chris Sanger, Ernst & Young head of tax policy, said many non-doms might decide to move their homes to Monaco, Switzerland or the Channel Islands.
As many as 3,000 wealthy non-doms are expected to leave the country as a result of the plans, according to Treasury figures. The numbers are disputed, however, with tax advisers saying that nobody really knows how many will leave.
Ernst & Young said the crackdown on the ‘remittance’ rules is forecast to cause havoc with non-doms' holdings of jewellery and fine art. Sanger suggested that some would need to work out whether the antique watches they wore had been bought with offshore cash. 'Tracing back the history will be a nightmare,' he said.
Some artworks on loan at British museums might fall into the same category, and have to be pulled out and stashed offshore, he indicated.
John Whiting, tax partner at PricewaterhouseCoopers, said that the latest draft legislation has confirmed that non-doms will not get personal allowances as soon as they claim the status. The £30,000 charge applies only after seven years of claiming the status.
Whiting said the allowance rules could well face a challenge under rules against non-discrimination.
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