The UK Budget delivered by Chancellor Darling in March provided some concessions for UK resident non...
The UK Budget delivered by Chancellor Darling in March provided some concessions for UK resident non-domiciles against the tax and residence measures announced in the pre-Budget report, though fears remain that the Government's position will damage Britain's competitiveness.
In his maiden Budget speech, Chancellor Alistair Darling said non-doms made a "central contribution" to Britain's growth and prosperity, but it was "right and fair" that they pay a "reasonable charge" to continue to enjoy the remittance basis of taxation on their foreign-sourced income and gains, while the UK would not seek to tax unremitted income and gains.
Mark Summers, private client partner at City law firm Speechly Bircham, pointed out some small changes to the regime that featured in the Budget report but not in the speech.
"The Government has made some very significant concessions in the fine print and seen common sense on a number of points," said Summers.
"The most significant is that the £30,000 charge will be creditable against foreign income and gains for UK tax, and should be treated as creditable to some extent against foreign taxes. This will be particularly significant for UK-resident US citizens who faced the prospect of double taxation.
"There have also been concessions in relation to offshore trusts (see page 27). It will be possible for assets to be re-based automatically as at 6 April 2008 if the trustees make an election, although it would seem that this may come at the cost of having to disclose trust income and gains in the future."
Meanwhile, Skandia International says the Budget opens up significant possibilities for non-dom investment in offshore bonds. For those who choose not to pay the £30,000 charge, an offshore bond would enable clients to defer payment of UK tax until encashment of the bond, when the individual may no longer be a higher-rate taxpayer or may no longer be a UK resident.
Colin Jelley, head of tax and financial planning at Skandia, commented: "The charge on non-doms is likely to give a significant boost to the offshore bond market.
"Whatever investment decisions are made, there will continue to be a definite need for advice for this group of people."
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From 1 March