UK: UK Tax Changes Affecting Non-UK Domiciliaries

The Chancellor of the Exchequer George Osborne today announced the outcome of the review into the taxation of non-domiciled individuals ("non doms") that the Government has been carrying out since June 2010. Four new proposals will be subject to consultation in June this year with a view to legislating in the Finance Bill 2012 and the measures becoming effective from 6 April 2012.

New £50,000 charge for longer term UK resident non doms from April 2012

In order to be taxed on the remittance basis on their foreign income and gains, non UK domiciled taxpayers who have been UK tax resident for seven out of the preceding nine years currently pay a £30,000 charge in addition to the loss of their personal allowance and capital gains tax exemption.

From 6 April 2012 this charge will be raised to £50,000 for those non UK domiciled taxpayers who have been UK resident for twelve or more years out of the previous fifteen years. We will therefore have three categories of non doms moving forward – 'short term' (UK resident for less than seven out of the previous nine tax years), 'medium term' (UK resident for at least seven years but less than twelve), and 'longer term' (UK resident for twelve or more years out of the previous fifteen years) with different charges applying in order to access the remittance basis. In addition there will be a fourth category of those who are "deemed domiciled" for Inheritance Tax (IHT) purposes only, having been resident in the UK in seventeen out of the previous twenty years.


If these changes are implemented from 6 April 2012 as planned the new higher £50,000 charge would apply to anyone who became (and has since remained) UK tax resident prior to 6 April 2001.

This change was not unexpected although it is perhaps confusing that it was not applied on the same basis as the IHT deemed domicile test (which looks at UK tax residence in the previous seventeen out of twenty years).

The new higher charge may make it uneconomic for longer term UK residents to pay tax on the remittance basis. However, any move to an arising basis of taxation does bring additional disclosure to HMRC as to sources of income and gains as well as adding to compliance costs. Non UK doms typically have offshore assets in foreign currency and all income and gains need to be recalculated in £ sterling and on a UK tax basis.

Official figures released recently stated that approximately 5,400 non doms paid the £30,000 charge for 2008/09. It is expected that the new higher charge will raise around £70 million and an additional £60 million individuals will become non resident as a response to this new charge and that has been factored in to the Treasury costings. It is also expected that there will be an increase in tax planning as a response.

New exemption for foreign income and gains remitted to the UK for the purpose of commercial investment in UK businesses

The Chancellor announced that foreign income and gains remitted to the UK for the purpose of commercial investment in UK businesses will not be subject to tax.

No details of this proposed relief have been given and in particular, what 'commercial investment in UK businesses' actually means. It is unlikely to apply to investments made in quoted UK companies and we will have to await further details. There will be anti-avoidance rules to prevent funds remitted to the UK for other purposes being channelled through this route.

The Government hopes by introducing these rules that the current tax disincentive for remitting funds to the UK will be removed opening the UK up as a place to do business.


This relief is extremely welcome and will hopefully achieve its objective of encouraging non doms to invest in the UK and thereby generate additional UK tax revenues. However, it is frustrating that there are no details available. As the relief will not be available until next year any non dom thinking of investing in a UK business may now be tempted to put their plans on hold as it is unlikely that any such tax relief will be backdated.

In order to take full advantage of this relief it will be even more essential than ever for non UK doms to segregate their foreign income, foreign gains and clean capital.

It is unclear what is meant by 'commercial investment' and whether any tax advantaged investments such as EIS and VCT companies will be included. It is also unclear as to how long such an investment would be required to be held. Further details will emerge in June as part of the proposed consultations.

It is also unclear whether this relief would extend to "nominated" income or gains which can currently have very significant tax implications if brought to the UK.

Additional technical simplifications

The Chancellor announced that the Government will "simplify some aspects of the current tax rules for nondomiciles to remove undue administrative burdens".


No details of these have been announced but any simplification of the complex legislation will be welcome.

No further substantive changes to non dom taxation in this Parliament

The Chancellor announced that there would be no further substantive changes to the taxation of non doms for the remainder of this Parliament.


This is welcome as the rules are extremely complex and there is still uncertainty as to whether foreign income and gains have been deemed to be remitted in many complex situations. However, it does leave open the possibility of further tweaks being made to the legislation if loopholes are found or HMRC considers that it is not operating as intended.

Very few tax enquires were raised by HMRC into non dom Tax Returns for 2008/09, being the first year in which the new rules were applicable. This is despite the fact that 123,000 non dom Tax Returns were submitted and £5.9 billion of additional tax was paid in 2008/09, the latest year for which figures are available. A specialist HMRC unit has been set up to deal with non doms and we consider it only a matter of time before HMRC increase their focus in this area. In particular they are likely to want to investigate whether adequate records have been kept to demonstrate whether amounts remitted to the UK are taxable as income or capital gains or non taxable.

The Government also announced its intention to tax "very high value property, where evasion and avoidance are widespread and some of the wealthiest are not paying their fair share. We will also be redoubling our efforts to find ways of ensuring that owners of high value property cannot avoid paying their fair share." This relates to the avoidance of Stamp Duty Land Tax.

We will have to wait until the publication on the proposed consultation documents in June 2011 for further details.

Statutory Residence Test

The Chancellor announced that, following consultation later this year, a new statutory residence test will be introduced from April 2012.


This is extremely welcome as there are very few existing legislative rules regarding UK residence. There have been a number of high profile court cases in recent years on the subject which have only proved to highlight how complex is the current position. In addition taxpayers who sought to rely on the guidance given on the subject by HMRC in the booklet IR 20 (now replaced by HMRC6) have found that this did not give them any protection when their case came to court. It has made it extremely difficult for advisers to give clients any degree of certainty as to their UK tax residence position – whether going overseas for 'full time employment abroad' or otherwise.

It is hoped that the rules will mirror those of other countries such as the US 'substantial presence' test which has been in place for a number of years and is tried and tested.

There will inevitably be winners and losers but, in general, taxpayers will generally value the certainty such a statutory rule gives. Detailed records of movements to and from the UK will need to be kept in order to demonstrate that the test has been satisfied.

Please Note

We have taken care to ensure the accuracy of this publication, which is based on material in the public domain at the time of issue. However, the publication is written in general terms for information purposes only and in no way constitutes specific advice.

You are strongly recommended to seek specific advice before taking any action in relation to the matters referred to in this publication. No responsibility can be taken for any errors contained in the publication or for any loss arising from action taken or refrained from on the basis of this publication or its contents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Richard Mannion
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.