The government’s draft legislation on the taxation of non-domiciles has attracted criticism for its complexity.
HM Revenue and Customs said that under the new tax regime non-domiciles who have been resident in the UK for seven out of ten years will have to pay a £30,000 charge should they wish to maintain the tax-free status of their offshore income.
The draft rules also indicate that those non-domiciles who protect their offshore funds from tax will forfeit personal allowances for any income they earn in the UK.
However, tax experts have described the proposals as complicated and warned that many non-doms may choose to locate elsewhere.
If they did so, the UK risked losing the economic benefits their presence here brings. Works of art on loan at British museums may also leave.
Particularly under threat are US bankers who could be hit with double taxation if the rules were introduced. This is because US worldwide tax law may not recognise the £30,000 charge as a tax as it does not represent a percentage of someone’s income.
Confirming whether an artwork or a valuable piece of jewellery had been purchased using offshore funds would also be very difficult, critics argued.
The new legislation is due to be included in the 2008 Finance Bill.
Date:4 February 2008
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