Non-domicile tax legislation causes chaos

The Government must delay the introduction of its non-domicile tax legislation for at least twelve months to avoid total chaos, tax experts at PKF Accountants & business advisers have warned.

In last year's Pre-Budget report, the Chancellor proposed a flat rate charge for non domiciles of £30,000, which will apply after they have been UK resident for seven years. In his speech and in calculating the yield from the measure, the Chancellor suggested that 15,000 taxpayers would find it beneficial to pay the levy.

Following ‘clarification’ by HMRC to points raised by the Society of Trust and Estate Practitioners (STEP), it appears that pre-6 April 2008 capital gains of non-resident trusts formed by non-UK domiciled individuals are not intended to be caught by the new legislation.

PKF National Director of Tax Lisa Macpherson who is a member of STEP says that more detail is needed so that individuals and the tax profession are clear on the implications.

Lisa says: “We welcome the clarifications announced today but the way this legislation is being introduced is causing confusion and chaos. We are facing a situation today where clients are liquidating off-shore companies and trusts which they may not have needed to do. It currently isn’t clear what taxpayers should be doing. Should they be staying or leaving?"

“The position for non-domiciled taxpayers is anything but clear and the lack of consultation is proving disastrous to the UK’s reputation for stability. If the proposals are to be rushed through for political reasons the uncertainty is hurting."

“There is only one course of action open to the Government; they should delay introduction of the legislation for at least a year so that everyone, including the Treasury and HMRC, can fully understand what the impact will be.”