THE USE of dual contracts by non-domiciled taxpayers is under government scrutiny amid fears the practice is used to artificially drive down tax bills.
The legislation, set to be included in the Finance Bill 2014, is designed to tax certain overseas earnings and employment income of non-domiciled individuals on an ‘arising’ basis. In other words, the income caught by this measure will cease to be eligible for remittance basis tax treatment.
The government believes dual contracts are used by non-domiciled individuals to create what are typically artificial divisions between the duties of a UK employment and an employment overseas in order to obtain a tax advantage.
The measure will come into effect for income arising in tax year 2014/15 and thereafter, while the draft legislation notes it will not apply to overseas income that falls within the three-year period for Overseas Workday Relief.