Shorter Reads

Are non-doms really leaving the UK?

1 minute read

Published 9 August 2019

Authors

Share

Key information

  • Services
  • Private Wealth
  • Tax & Estate Planning
  • Trusts

The new figures released by HMRC are not surprising given the tax legislation that has been introduced steadily over the last 10 or so years, which has been designed to attack the tax regime available to non-domiciliaries resident in the UK. That said, the “non-dom” regime is still a very effective planning tool for non-domiciliaries and HNW individuals should strongly consider taking advantage of the regime while they still can.

One part of this article in particular should be clarified:

HMRC said the number of non-doms had also fallen because some had chosen to change their status to be UK-domiciled after the government introduced an annual “non-dom levy” of between £30,000 and £60,000. The levy, as of April 2017, allows non-doms to continue to pay no tax on offshore income and capital gains, unless they bring the money to the UK. The levy raised just £315m last year.

It is correct that non-domiciled individuals who have been resident in the UK for over a certain amount of time must pay an annual charge in order to access the more-favourable remittance basis of taxation. This was the case before April 2017 and has continued to be the case in the period since.

One of the key changes in April 2017 was that non-domiciliaries can no longer reside in the UK indefinitely whilst continuing to shield their non-UK income and gains from UK tax. Once an individual has been UK resident for 15 out of the previous 20 tax years, they are automatically UK deemed domiciled and will be taxed on their worldwide income and gains as they arise.

It is not correct that this change means individuals are ‘changing’ their status to be UK-domiciled. It is true that non-domiciliaries can elect on a year-by-year basis whether to be charged on the remittance basis or the arising basis, the former of which is not available to UK domiciled individuals. It is also true that non-domiciliaries can elect to be treated as UK deemed domiciled for inheritance tax purposes. It may be that the author is conflating these concepts.

So the reason why HMRC’s revenue from the remittance basis charge has fallen could be attributable to more factors than the article suggests:

  • More individuals may indeed be leaving the UK.
  • As remittance basis users can elect whether to be taxed on the remittance basis in any given year, non-domiciliaries may be getting wiser as to when to pay (or not to pay) the annual charge. The charge is only worth paying if the income and gains being shielded amount to more than the corresponding charge.
  • Since April 2017 there are many UK resident non-domiciliaries who now fall foul of the ’15 out of 20′ rule above. These individuals have all become UK deemed domiciled and the remittance basis of taxation is no longer been available to them. Before April 2017 these individuals could have happily continued to pay the remittance basis charge and so, necessarily, the revenue from the charge will have decreased.

If anything, therefore, the fact that there are HNW individuals who were previously non-domiciled and who have decided to stay in the UK shows that the UK continues to be a jurisdiction where wealthy individuals want to stay. It also shows that these HNW individuals are driven by many more concerns than simply their tax liabilities.

https://www.paminsight.com/epc/article/70-percent-of-parents-with-children-under-18-do-not-have-a-will-or-appointed-guardian?message=710

Message us on WhatsApp

Related latest updates
PREV NEXT

Arrow Back to Insights

Shorter Reads

Are non-doms really leaving the UK?

Published 9 August 2019

Associated sectors / services

Authors

The new figures released by HMRC are not surprising given the tax legislation that has been introduced steadily over the last 10 or so years, which has been designed to attack the tax regime available to non-domiciliaries resident in the UK. That said, the “non-dom” regime is still a very effective planning tool for non-domiciliaries and HNW individuals should strongly consider taking advantage of the regime while they still can.

One part of this article in particular should be clarified:

HMRC said the number of non-doms had also fallen because some had chosen to change their status to be UK-domiciled after the government introduced an annual “non-dom levy” of between £30,000 and £60,000. The levy, as of April 2017, allows non-doms to continue to pay no tax on offshore income and capital gains, unless they bring the money to the UK. The levy raised just £315m last year.

It is correct that non-domiciled individuals who have been resident in the UK for over a certain amount of time must pay an annual charge in order to access the more-favourable remittance basis of taxation. This was the case before April 2017 and has continued to be the case in the period since.

One of the key changes in April 2017 was that non-domiciliaries can no longer reside in the UK indefinitely whilst continuing to shield their non-UK income and gains from UK tax. Once an individual has been UK resident for 15 out of the previous 20 tax years, they are automatically UK deemed domiciled and will be taxed on their worldwide income and gains as they arise.

It is not correct that this change means individuals are ‘changing’ their status to be UK-domiciled. It is true that non-domiciliaries can elect on a year-by-year basis whether to be charged on the remittance basis or the arising basis, the former of which is not available to UK domiciled individuals. It is also true that non-domiciliaries can elect to be treated as UK deemed domiciled for inheritance tax purposes. It may be that the author is conflating these concepts.

So the reason why HMRC’s revenue from the remittance basis charge has fallen could be attributable to more factors than the article suggests:

  • More individuals may indeed be leaving the UK.
  • As remittance basis users can elect whether to be taxed on the remittance basis in any given year, non-domiciliaries may be getting wiser as to when to pay (or not to pay) the annual charge. The charge is only worth paying if the income and gains being shielded amount to more than the corresponding charge.
  • Since April 2017 there are many UK resident non-domiciliaries who now fall foul of the ’15 out of 20′ rule above. These individuals have all become UK deemed domiciled and the remittance basis of taxation is no longer been available to them. Before April 2017 these individuals could have happily continued to pay the remittance basis charge and so, necessarily, the revenue from the charge will have decreased.

If anything, therefore, the fact that there are HNW individuals who were previously non-domiciled and who have decided to stay in the UK shows that the UK continues to be a jurisdiction where wealthy individuals want to stay. It also shows that these HNW individuals are driven by many more concerns than simply their tax liabilities.

https://www.paminsight.com/epc/article/70-percent-of-parents-with-children-under-18-do-not-have-a-will-or-appointed-guardian?message=710

Associated sectors / services

Authors

Need some more information? Make an enquiry below.

    Subscribe

    Please add your details and your areas of interest below

    Specialist sectors:

    Legal services:

    Other information:

    Jurisdictions of interest to you (other than UK):

    Enjoy reading our articles? why not subscribe to notifications so you’ll never miss one?

    Subscribe to our articles

    Message us on WhatsApp (no calls)

    Please note that Collyer Bristow provides this service during office hours for general information and enquiries only and that no legal or other professional advice will be provided over the WhatsApp platform. Please also note that if you choose to use this platform your personal data is likely to be processed outside the UK and EEA, including in the US. Appropriate legal or other professional opinion should be taken before taking or omitting to take any action in respect of any specific problem. Collyer Bristow LLP accepts no liability for any loss or damage which may arise from reliance on information provided. All information will be deleted immediately upon completion of a conversation.

    I accept Close

    Close
    Scroll up
    ExpandNeed some help?Toggle

    Get in touch

    Get in touch using our form below.