The New UK Non-Dom Rules

The UK is to implement controversial proposals for individuals who are UK tax resident but not domiciled here.  Although numerous concessions have been made to dampen the impact of the proposals on the City of London and those who are internationally mobile, the Finance Bill 2008, which is likely to receive Royal Assent during the course of July, incorporates these proposals.  The proposals are to have retroactive effect from 6 April 2008.

The key proposed changes are: 

1. each non-domiciliary who is over the age of 18 and has been tax resident in the UK for at least 7 out of the last 10 years must pay an annual fee of £30,000 to avail himself the remittance basis of taxation, otherwise he must pay tax on his worldwide income on an arising basis. 
2. an individual who chooses the remittance basis of taxation looses his income tax allowance and annual capital gains tax exemption. 
3. non-domiciliaries who have been tax resident in the UK for less than 7 out of the last 10 years can avail themselves the remittance basis of taxation without paying the annual fee of £30,000, but if they choose to do so, they loose their income tax allowances and capital gains tax exemptions. 
4. each non-domiciliary must make the determination independently every year, so the determination may vary from one year to another and between individuals in the same household in any one year. 

For further details on the proposed changes including a flow chart please click here or contact Kassim Meghjee (who is a Tax Partner at Steptoe & Johnson’s London Office).