Non-dom rules harsh on those born in UK, claims CIoT

ADVISERS are concerned that government proposals for the reform of taxation of non-domiciles could lead to an unfair result for those born in the UK who live most of their life abroad.

A Treasury consultation document released this week confirms that individuals who are born in the UK and who are UK-domiciled at birth will not be able to claim that they are not domiciled for tax purposes while they are living in the UK.

It also reveals a ‘deemed domicile rule’ will be introduced, meaning that long-term residents of the UK can no longer claim to be not domiciled for tax purposes, effectively abolishing the permanency of non-dom status.
The CIoT claims the introduction of the place of birth element of the rule introduces complexity into an already complex area.

“Among the new proposals, the stricter regime for those born in the UK seems unduly harsh,” said Aparna Nathan, chair of the CIoT’s capital gains tax and investment income sub-committee. “Attaching such importance to a place of birth, which is clearly outside the individual’s control, and could be a matter of happenstance, is curious.

As the proposal stands, a UK-born person who returns the UK to look after ageing relatives or to take up a temporary secondment will become deemed UK domiciled from the first tax year, Nathan added.

“As a result, they will have to pay UK income tax and capital gains tax on their worldwide income and gains, and UK inheritance tax on their worldwide assets. This seems an unduly onerous consequence of their place of birth combined with what might be a relatively brief period of UK residence later in life.”

Advisers at Moore Stephens, tenth in Accountancy Age‘s Top 50+50 supported by Wolters Kluwer, criticised it for a perceived lack of detail.

Partner Gill Smith said: “This lack of clarity does not do enough to reassure high net worth individuals who may be considering leaving the UK. There are very complex issues to be addressed that are simply not covered, or painted in extremely broad brush strokes.

“The proposed changes impact on numerous areas of the non-dom rules and it is clear these have not all been considered.”

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