The consultation also confirmed George Osborne’s plan to reduce the 17-year window of time it takes for an individual to gain UK-domicile status (and therefore subject to UK tax), to 15 out of 20 years.
Generous
Tax advisers suggested there might be some pressure to reduce this further, with some even suspecting the government might like to abolish the word ‘non-dom’ altogether.
McCann said the 15-year rule “remains generous” by international standards and means long-term non-doms can continue to enjoy a tax-advantaged position.
Mark Davies, director of Mark Davies & Associates, said there might be increased pressure to reduce the non-dom timespan further if the new rules fail to instigate a fall in the number of non-doms in the UK.
Complicated
He also pointed to the different set of rules which apply to non-doms and UK-doms: “[The Treasury] hasn’t decided whether the rules for non-doms will change or whether there should be three rules: one for UK doms, one for nondoms, and one for deemed-doms.
“The proposed changes will be complicated and it will require a lot of time to draft the legislation,” Davies said.
He also said he had doubts as to whether the rules are compliant with European Union principles, which enable EU residents to move capital freely within the EU and third country states without discrimination.
Modernise
Tax advisers agreed that the government’s paper is lacking in detail, but suggested the principles of the reforms are clear as the government looks to modernise the domicile rule, without causing any issue to new foreign individuals coming into the UK.
McCann said: “If the ending of permanent non-dom status leads to some stability then that will be a good thing, but I expect there will be a lot of criticism aimed at the government over the treatment of UK-born domiciles who have largely severed their UK connections.”
