The result is that going forward, non-doms who have been UK resident for 12 or more years, and who want to retain access to the remittance basis of taxation, will have to pay an extra £20,000 on top of the existing £30,000 annual tax charge.
For individuals who have been resident for at least seven years but less than 12, the charge remains at £30,000.
When the remittance based charge was first introduced, many critics warned that rather than generating significant revenue for the Government, it could in fact have a detrimental impact on the economy, as many of these individuals – who typically invested heavily in the UK – would simply move somewhere else.
To address this point, the Government has stated that the recently-increased remittance-based charge will not apply where non-doms remit foreign income or capital gains to the UK for the purpose of commercial investment in its businesses.
But while this will no doubt be welcome news to some, there is no getting away from the fact that it just got significantly more expensive to enjoy the remittance basis of taxation for those who intend to remain UK resident for the longer term.
The Government said it will consult on the detail in June, ahead of legislating in the Finance Bill 2012.
Unclear rules on residency
One faint glimmer of hope for many people coming to, or leaving, the UK lies in the lack of clarity as to what constitutes being UK resident for tax purposes.
The current rules are unclear and difficult to interpret. And as result, many individuals, despite their best efforts, can unknowingly find themselves liable to UK tax.
It was thought that a statutory residence test may be something to fall out of the forthcoming Robert Gaines-Cooper appeal, and so the fact that the Government plans to consult on this issue can only be seen as a positive step.
Changes to UK Inheritance Tax
The UK Inheritance Tax (UK IHT) nil rate band is frozen at £325,000 until April 2015, and remains at 40%. From 2015 onwards, the Consumer Price Index will be used as the default indexation assumption.
However, from April 2012, estates leaving 10% or more to charity will benefit from a reduced UK IHT rate of 36%. For many, this will add a further layer of complication to an already overly complicated tax which is shortly going to be completely overhauled.
The fact remains that, at a time when many countries have abolished ‘death taxes’, the thought of an individual’s estate being reduced in value by at least 36% is still far too much to comprehend.
For that reason, and despite the Government’s best efforts, people will continue to do whatever they can to minimise the amount of tax that their estate suffers.
