UK Tax Consultancy Puts Forward Plan For Domicile Tax Changes

by Robin Pilgrim, LawAndTax-News.com, London

28 July 2003

Responding to the UK government's background paper on residence and domicile in the United Kingdom for tax purposes, tax consultancy WJB Chiltern has suggested that in its opinion, no major changes should be made to the existing system, as increasing the tax burden on non-domiciled residents could harm the country's international competitiveness.

However, given the amount of adverse publicity generated by a 'loophole' which allows non-domiciled citizens to avoid UK taxation on a significant portion of their earnings, it seems unlikely that the government will be able to avoid making some changes to the way in which such people are taxed.

In the event, then, that the government does implement changes to the tax regime for so-called 'non-doms', the firm has released a list of five measures that it would support.

Speaking last week, WJB Chiltern's director of tax services, and chairman of the ICAEW's Tax Faculty, Mark Lee announced that if pressed to act, the government should introduce a formulaic way of calculating residence based on days physically present in the country, abolish the concept of ordinary residence, and scrap the remittance basis for taxing the income and capital gains of non-domiciled citizens.

Mr Lee also suggested the introduction of a rebuttable presumption that foreign citizens resident in the UK for 17 out of 20 years should be deemed to be domiciled here for tax purposes, and the creation of a specific fixed expatriate deduction for short-term expatriates.

According to the Tax Faculty chairman, this last measure would: 'encourage key skills and workers to the UK, whilst removing the subjective rules that currently apply and act as a disincentive to short-term assignments in the UK.'

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