The Society of Trust and Estate Practitioners made the warning as it submitted its formal response to two consultations issued by HMRC in June this year. The consultation documents proposed a radical overhaul of both the UK’s residency system and the tax treatment of non-doms.
The changes to the domicile rules are aimed at making the UK more attractive for non-doms to invest in the UK, by allowing them to bring in income from foreign investments without incurring tax, as long as they are to reinvest in onshore.
In its response, STEP acknowledged this intention saying that the remittance rules put in place by the Finance Act 2008 currently act as a disincentive to invest in the UK and that it is pleased the government had “now recognised this”.
It also said that the new rules should be made easy to comply with and “should not necessitate extremely onerous accounting mechanisms to be put into place in order to comply”.
Wendy Wlaton, chairman of STEP’s UK technical committee and head of private client and a partner at BDO, said: “We welcome the proposals set out in the consultation document in principle, but feel that they do not go as far as is required to reduce the complexity of the rules or to stop non-domiciliaries from feeling unwelcome, and driving those who are already here away.”
Meanwhile, STEP welcomed HMRC’s proposals for a reform of the tax residency rules, saying that the current system is unsatisfactory due to its uncertainty and acts as a disincentive to those considering coming to the UK whether for business, work or pleasure or with a view to investing there.
It added that the uncertainty of the current rules also makes it difficult to advise many of those exiting the UK when they have become non-UK resident for tax purposes and that it therefore advocates a pure day count test – which it noted was not ruled out in the original proposals.
Walton added: “A statutory residence test is capable of being a simple and objective test such as those widely used by other countries. While STEP would have preferred the simplicity of a day count test the proposed changes should give clients much needed certainty and improve our international competitiveness.”
HMRC’s consultation ran for 12 weeks and closed for submissions on the 9 September.
