header-logo header-logo

Taxing Matters

21 February 2008 / Peter Vaines
Issue: 7309 / Categories: Legal News , Public , Tax , Procedure & practice
printer mail-detail

DOMICILE REVIEW

Also recently published is the draft legislation to the remittance basis and the £30,000 charge on foreign domiciled individuals who are resident in the and wish to take advantage of the remittance basis. This is not a tax but an independent charge and will not be creditable against any tax due on foreign income or gains remitted to the .

This is partly just a matter of calculation (is the £30,000 more or less than the tax you would otherwise pay?) but it is also a matter of profile. There will be some people who will be reluctant to expose their worldwide income and gains to HMRC as they fear being targeted for special attention by reason of their wealth.

Others, perhaps being brought up in countries where the integrity and professionalism of the tax authorities is less fully developed, will be reluctant to reveal the extent of their assets to the tax authorities on grounds of security. Their anxiety will be increased by the requirement to provide HMRC with details of all offshore trusts (even existing trusts) within 12 months. They will pay the £30,000 simply to avoid putting themselves at risk.

Others view this as the harbinger of further oppressive legislation and are planning to go—and there seems to be a startling number of people for whom leaving the has become the preferred option.

 

Transparency

The changes to the remittance basis are profound and serious issues arise about the retrospective nature of some of the new rules. The change in the definition of remittance, the elimination of the source doctrine and the effect on remittances by third parties are bad enough, but what about income and gains arising in the current year which is remitted next year? The general idea for offshore companies and trusts is to eliminate the present exemption which applies to foreign domiciled settlors and shareholders to whom gains would otherwise have been attributed and to introduce a kind of transparency. If the offshore trust makes a gain on a foreign asset, it is subject to the remittance basis (rather like it would have been if the asset had been owned by the settlor personally) but if the asset is in the , there is no remittance basis—the gain is fully chargeable. No wonder HMRC needs full details of all existing trusts because otherwise it will have no means of identifying such chargeable gains.

Some of the proposals are so draconian that they will be simply impossible. Where the trust gains cannot be attributable to the settlor, the accumulated capital gains are taxed on the beneficiaries to the extent that they receive capital payments or benefits.

A foreign domiciled beneficiary will no longer be protected. So foreign trustees of a foreign resident trust with a foreign settlor and foreign assets make a distribution outside the to a foreign domiciled beneficiary. If that beneficiary is resident in the (and how do the trustees know that?) a charge arises and the trustees must provide a whole lot of information which does not exist because they have never had cause to keep it. This is so onerous that some people are confidently predicting a degree of relaxation—but I wouldn’t be too sure.

Issue: 7309 / Categories: Legal News , Public , Tax , Procedure & practice
printer mail-details

MOVERS & SHAKERS

Birketts—trainee cohort

Birketts—trainee cohort

Firm welcomes new cohort of 29 trainee solicitors for 2025

Keoghs—four appointments

Keoghs—four appointments

Four partner hires expand legal expertise in Scotland and Northern Ireland

Brabners—Ben Lamb

Brabners—Ben Lamb

Real estate team in Yorkshire welcomes new partner

NEWS
Robert Taylor of 360 Law Services warns in this week's NLJ that adoption of artificial intelligence (AI) risks entrenching disadvantage for SME law firms, unless tools are tailored to their needs
From oligarchs to cosmetic clinics, strategic lawsuits against public participation (SLAPPs) target journalists, activists and ordinary citizens with intimidating legal tactics. Writing in NLJ this week, Sadie Whittam of Lancaster University explores the weaponisation of litigation to silence critics
Delays and dysfunction continue to mount in the county court, as revealed in a scathing Justice Committee report and under discussion this week by NLJ columnist Professor Dominic Regan of City Law School. Bulk claims—especially from private parking firms—are overwhelming the system, with 8,000 cases filed weekly
Writing in NLJ this week, Thomas Rothwell and Kavish Shah of Falcon Chambers unpack the surprise inclusion of a ban on upwards-only rent reviews in the English Devolution and Community Empowerment Bill
Charles Pigott of Mills & Reeve charts the turbulent progress of the Employment Rights Bill through the House of Lords, in this week's NLJ
back-to-top-scroll