Non-dom reform proposals good for UK economy

The Society of Trust and Estate Practitioners (STEP) believes the non-domiciled reforms announced by the Government will benefit the UK economy.

Commenting on proposals, Wendy Walton, chairman of STEP’s Technical Committee, said: “The exemption on the taxation of remittances for non-doms for commercial investment into the UK will encourage investment into the UK.  The exemption is widely drafted and allows investment into trading companies.”

Included in Government proposals are that commercial investment exemption will apply to remittances to the UK for investment into trading companies.  This will include investment in companies developing or letting commercial property.

The Government are still open-minded as to whether investment in quoted companies should also be included.  In addition, further changes to the taxation of non-doms have been announced, including the simplification of four areas that are considered too complex being:

1. nominated income accounts
2. foreign currency bank accounts
3. assets brought to the UK for sale
4. foreign earnings for those individuals who are not ordinarily resident in the UK.

It is also proposed that for those non-dom individuals who have been resident in the UK for more than 12 out of the previous 14 years, the remittance basis charge will be increased to £50,000.

Commenting on the statutory residence test by HM Treasury, Wendy Walton, chairman of STEP’s Technical Committee, said: “The broad principles behind the proposed test appear to be objective and will provide simplification and greater certainty over the current position.”

The Government's aim is to introduce a test that is transparent, objective and simple to use.  There are three tests proposed.

• Part A will provide that an individual is conclusively resident outside of the UK.
• Part B sets out a test which will provide that an individual is conclusively resident in the UK.
•  Part C provides for more complex cases and takes into account connecting factors in the UK, such as family and available accommodation.

It is also proposed that an anti-avoidance rule will be introduced whereby dividends paid to a non-resident individual from a closely controlled company, will remain subject to UK tax, where the individual is resident outside of the UK for less than 5 complete tax years.