Tax
Change To UK Tax Law Could Catch Non-Doms Unawares, Warns Firm
Recent changes to the UK tax code, having the potential to hit non-domiciled individuals with a heavy bill, have been flagged by audit, tax and advisory firm Crowe Clark Whitehill.
Recent changes to the UK tax code, having the potential to hit
non-domiciled individuals with a heavy bill, have been flagged by
audit, tax and advisory firm Crowe Clark
Whitehill.
It said that until 4 August 2014, HM Revenue and Customs, the UK
tax authority, said non-doms using the “remittance basis” for
their tax affairs could use offshore income and gains that were
unremitted as security for commercial loans to be used in the UK
for spending. Under these arrangements, only offshore income or
gains used to repay capital or interest would be regarded as a
taxable remittance; the underlying security would not be.
However, this concession has now been removed. Money brought to,
or used in the UK, under a commercial loan facility, which is
secured by foreign income or gains, will be treated as a taxable
remittance of the foreign income and gains to the extent of the
loan.
“Remittance basis” means a person is liable to UK tax on any
remittances (amounts) of foreign income and gains that are sent,
or “remitted” to the UK.
“This [concession] announcement was unexpected, particularly
given the Chancellor’s [George Osborne] previous promise that
there would be no more changes to the taxation of resident
non-domiciliaries during this parliament,” the firm said in a
note.
“To make matters worse, if the loan is subsequently serviced or
repaid from different foreign income or gains, the repayments of
capital and interest will also constitute taxable remittances in
the normal way. This effectively means that there could be
taxable remittances of double the amount of the loan brought to
the UK,” the firm continued.
“Existing arrangements must be disclosed to HMRC where foreign
income or gains have been utilised as collateral for a loan
brought to the UK and no remittance declared. These existing
arrangements will only avoid a charge to tax under the new regime
if an undertaking is given by the 31 December 2015 that the loan
will be repaid by 5 April 2016, or that the collateral will be
replaced by non-foreign income or gains by the same date,” it
said.