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STEP Urges Rethink Of New UK Non-Domicile Tax Regime

by Robert Lee, Tax-News.com, London

28 November 2007


The Society of Trust and Estate Practitioners (STEP) has called for an impact assessment of proposals by the UK government to extend recent changes in the capital gains tax regime to non-domiciled individuals, and has warned that the new rules may lead to investments leaving the UK.

In the Pre-Budget Report 2007, the UK Government announced a range of changes to the regime for resident non-domiciled individuals. Proposals to extend CGT were mentioned in the PBR, but until recently, there had been no further detail available. According to STEP, industry bodies have subsequently been made aware that the proposal is to tax UK gains within trusts on an arising basis, and foreign gains within trusts on a remittance basis.

Commenting on the government's proposals, STEP Director of Policy and Communications Keith Johnston stated: "Our members' non-dom clients are very concerned about the CGT charge on non-UK trust assets. This comes on top of the uncertainty caused by the non-creditable GBP30,000 levy. We believe that these measures taken together could lead to a flight of talent and investments out of the UK at a time of economic instability."

Judith Ingham, Chair of STEP Technical Committee added: "The CGT proposals are a major policy change and should be accompanied by proper consultation and an economic impact assessment. Many non doms have their investments held through non-UK trusts. If these proposals go ahead as planned it is likely that the trustees will decide in the run up to April 2008 to dispose of their UK investments and instead to invest and transact their business overseas, simply because this will be so much more attractive in capital gains tax terms. This could have a very serious impact on the UK economy."

STEP is seeking support for a postponement of the CGT changes until the impact of the measures has been properly assessed. STEP is also seeking an US-style statutory residence test to end uncertainty in that area.

The full text of the STEP brief on proposed CGT changes for Non-Doms in the UK can be found in the Tax News Resources section.

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