The Chartered Institute of Taxation (CIOT) has this week announced it welcomes the Budget changes to the taxation of non-residents and foreign domiciliaries.
The recently announced changes included amendments to the day-counting rules, the general rebasing election for offshore trusts, and the "more sensible" proposals on what constitutes a remittance.
However, in welcoming these changes, the CIOT pointed out that they could easily have been avoided if proper consultation had been undertaken at the beginning of the process, before the Government announced its proposals in the Pre-Budget Report (PBR).
John Barnett, Chairman of the CIOT’s Capital Taxes Sub-Committee, observed that:
“HMRC has consulted extensively since the draft legislation was issued. The changes announced for offshore trusts and companies in the Budget are much more thought-out and targeted."
"In particular they ensure that commercial investment in the UK is not subjected to worse capital gains tax treatment than investment elsewhere, but foreign doms are still taxed on the benefits they receive in the UK in the way intended. That said, we think that more may need to be done to ensure that investment in the UK is also not penalised for income tax purposes."
The CIOT believes that there are still a large number of rough edges to the proposals. These include the retrospective nature of the charges where the source of income has ceased many years ago, the lack of detailed rules for mixed funds, and the continued lack of a proper statutory residence test.
According to the CIOT, one of the worst remaining aspects of the proposals will be for low-earners, for instance seasonal agricultural workers from other parts of Europe. While they will now be allowed up to GBP2,000 of foreign income without jeopardising their tax position, as soon as their income exceeds this figure, they may end up losing their personal allowance.
The CIOT concluded by expressing continuing serious concerns about individuals falling into this category.
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