As we go to print, the Government’s intention is still to bring in changes relating to the above with effect from 6th April 2008 having firstly issued a consultative document and then draft legislation last January with subsequent “clarification” to the profession by the Acting Chairman of HM Revenue and Customs.

PRINT ARTICLE PDF FORMAT

THE £30,000 LEVY

The remittance basis for non-UK investment income and gains (i.e. broadly that they are taxable only when money is brought into the UK) continues, but in order to take advantage of it after 6 April 2008, those who have been resident in the UK for at least seven out of the last nine tax years will need to pay an annual levy of £30,000. The alternative is to pay UK tax on worldwide income and gains instead of the levy.

Individuals can elect each year whether or not to claim the remittance basis, and if so, pay the annual tax charge. If they choose the remittance basis, individuals will not be able to claim the personal allowance (2008/09 -
£5,435) or the annual CGT exemption (currently £9,200).

This restriction on allowances will, under the draft legislation, apply immediately i.e. not just after the seven year residence period has passed.

HM Revenue and Customs are discussing with overseas tax authorities how the £30,000 charge can become creditable against foreign taxes, and this particularly applies to the US, where a worldwide basis of taxation applies to US nationals.

Money brought into the UK to pay the £30,000 charge will not itself be taxable.

Those using the remittance basis will not be required to make any additional disclosures about their income and gains arising abroad. So long as they declare their remittances to the UK and pay UK tax on them, they will not be required to disclose information on the source of the remittances (source: letter of 12 February 2008 from Dave Hartnett – Acting Chairman of Inland Revenue).

There is a £1,000 de minimis, in that someone with less that £1,000 of overseas income/gains will not have to lose their personal allowance and can still use the remittance basis.

TRUST CHANGES AND OFFSHORE COMPANIES

There are significant changes in this area and the current position following HM Revenue and Customs’ “clarification” letter is that all assets owned by trusts with non-domiciled settlors will be rebased as at 5 April 2008, which will include assets owned by underlying trust companies. From 5 April 2008, UK resident non-domiciled settlors will be taxed on gains realised by their trusts, as far as UK situated assets are concerned on an arising basis, irrespective of whether they remit the gains or not. As far as non UK situated assets are concerned, these will still be taxed on a remittance basis as will gains, the benefit of which is made available to UK resident nondomiciled beneficiaries. However, it should be noted that this remittance basis will only apply if the £30,000 levy is paid by the relevant settlor/beneficiary.

The position however is still very unclear and will continue to be so until the detailed amended clauses are published following the Budget, unless the Government postpones this legislation which of course is always possible

RESIDENCE

Changes are proposed that will mean that days of UK arrival and departure are included when calculating days spent in the UK for the purpose of establishing residence. Non-resident commuters therefore need to be very wary of becoming UK resident from 6 April 2008.

Michael Harris