What the Budget means for UK non-domiciles
Mark Walters, a senior tax professional and Director of Frank Hirth, which specialises in US and UK individual tax planning and compliance, explains what impact the 2009 budget will have on resident non-domiciled individuals.
"Finding a way through the minefield to plan as a non-domiciliary here in the UK has never been greater in living memory.
After the 2008 Budget, a considerable balance of City opinion saw the tax changes in legislation around the community of non-domiciled individuals here as harmful to the UK. So with Alistair Darling’s latest budget following the credit crunch, this view seems to have been cemented for this and a wider community.
Increasingly there is a long tail of regulation on both sides of the Atlantic, and certainly financial services regulations have proved in need of some review.
However, there are fine lines to walk in terms of London as an attractive place to do business. Lest we forget, in the time following Sarbanes Oxley enactments in the US during the early part of the century, London as a centre for deals boomed.
There is intent laid out in this latest Budget to alienate tax products, impose greater penalties, and move to tax business leaders/entrepreneurs from home and abroad at higher rates and with greater levels of complexity.
So for the non-domiciled individual, the full ramifications of the changes from 2008 will have to be considered in the coming months in regard to the first UK tax filing following those enactments in respect of the year ended 5 April 2009.
There will be a need to have one eye on the complexity for many which comes from those changes in the context of new rules on remittances, the diminishing availability of allowances and reliefs by claiming this status and, certainly for those here for seven years, the whole question of whether or not they shouldbe taxed on a worldwide basis or pay the £30,000 levy.
For American’s amongst the non-domicile population there remains open questions around whether the £30,000 is creditable and, whether US and other offshore interests are compatibly treated in the UK with any treatment overseas, exchange rate issues producing anomalies and so on.
All this, along with keeping another eye on planning forward in the year to 5 April 2010, plus the ramifications for some of the withdrawal of personal allowances on income above £100,000, and a higher band to be applied now at 50% from 6 April 2010. Couple this with the intent to reduce higher rate tax relief income between £150,000 and £180,000 (essentially charged at 30% on that pension income) for those above the £150,000 earning limit.
The attractiveness of converting income to capital gains in limited cases, where possible, has never been greater. Finding a way through the minefield to plan as a non-domiciliary here in the UK has never been greater in living memory."
