It is a relief to see that the UK Government has, in its 2008 budget backed down from implementing some of the draconian measures threatened against those non-domiciles who are tax residents of the UK. What is left in the UK budget will not be welcome to them but it could have been a lot worse.
The threat to impose a deemed domicile status and taxation on full world wide income has disappeared, as has the prospect of a step up in the level of charge after a fixed number of years. What is left is the charge on worldwide income after seven years of UK tax residence unless the non-dom pays up a fee of £30,000. The fee has been dressed up as a tax to make sure that most other jurisdictions (particularly the USA) will give credit for the fee in calculating any home tax liability.
Any off shore income or gains remitted to the UK will be taxed over and above the £30,000 but the remittance of the £30,000 will, in itself, not trigger further tax.
Those with offshore income and gains of £2,000 or less will be immune from this new tax burden.
The non dom will not be obliged to pay the £30,000 year after year but will be able to select which years he chooses to pay the fee and which years he does not. Where there is a need to remit to the UK, timing will, therefore, be a crucial issue.
Children under 18 years of age will be exempt from all this mayhem.
The issue of UK property held by non doms and trusts from which they may benefit has not been lost along the way and the legislation aims to capture gains from the disposal of UK assets by non doms. The good news is that the UK government has abandoned the issue of retrospective taxation and there will be no taxation on gains/income made prior to 5 April 2008 even if the proceeds are sent in to the UK after that date. Trustees of trusts can also elect to re-base the trust assets at 5 April 2008 to ensure that there will be no taxation of the increase in value of assets held but not disposed up to that date.
The UK government could not back down without leaving a few stings in the tail. Such issues as the order in which gains and income are taxed (last in first out) will produce complications which, generally, can be overcome but will require good legal advice.
As ever, the devil is in the detail of the legislation and although the broad overview is less pessimistic than at the time of the original announcements, the legislation is a minefield which requires careful negotiation and accurate advice. Hassans is well placed to give such advice and to guide its clients through that minefield.
The UK government has also executed a limited back down on the method employed in counting days for calculating residence. The original intention was to count both days of arrival in the UK and days of departure. This has been amended to count only those days of presence overnight. This will still affect those who travel frequently in and out of the UK and will reduce their ability to go there. Record keeping will be an essential part of this process for those going non-resident, as will the demonstration of the break from the UK.
The budget proposals, even in their modified form, demonstrate hostility to nondomiciles and those going non-resident. For some it will be seen as a good time to up sticks and leave the UK for good. There is only so much stealth tax a person can take.
Gibraltar with its proximity to Spain offers a competitive alternative to Switzerland and other jurisdiction which have been attracting those who wish to emigrate. The Gibraltar High Net Worth Individual scheme has been running successfully for many years and has many satisfied customers. The attractions of settling in Spain are also still there.
Hassans offers a full range of services from the tax standpoint to any émigré from the UK whether they wish to adopt High Net Worth Status in Gibraltar or to settle in Spain. Through our associate in Spain, Hassans S L we also offer the services of a painless integration into the Spanish system for those who wish to settle in Spain.
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.