Gordon Brown To Unveil Discussion Paper On UK Domicile Tax Laws

by Robin Pilgrim, LawAndTax-News.com, London

25 March 2003

Reports in the UK media have suggested that plans to amend the tax status of wealthy foreigners living in the United Kingdom but not domiciled there are likely to be unveiled in Chancellor Gordon Brown's forthcoming budget.

In his pre-budget report, announced last November, the Chancellor revealed that:

'The Government values a dynamic and open economy, and supports the international interchange of skills and expertise. However, the current rules determining residence and domicile have developed over the past 200 years, are complex and poorly understood, and do not reflect the reality of today's more integrated world,' and pledged to undertake a review of the UK's tax laws with regard to non-domiciled residents.

Opinion has been divided on the issue, with many welcoming the decision to redress the inequality of tax treatment between UK domiciled and non-domiciled residents (who don't have to pay tax on non-UK income), and others warning that any such move is likely to cause an exodus of wealthy overseas investors.

However, suggestions for changes to the domicile tax laws - which could potentially affect some 60,000 people- are unlikely to be prescriptive.

The most likely reform, according to experts, would be to impose a limit on the number of years that an individual could remain resident in the United Kingdom but not domiciled there for tax purposes. After the expiry of that period, they would be obliged to pay tax in the UK on their overseas income.

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