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Home» Business » New rules for non-doms

New rules for non-doms

Posted by admin - July 15, 2011 - Business, Tax

Non-dom taxChancellor George Osborne announced that non-doms who have been resident in the country for more than 12 years will have their remittance basis – the fee they are charged to prevent them paying tax on worldwide income – increased to £50,000 from £30,000.

Non-doms will be allowed tax-free remittance for investment in businesses that are “carrying out trading activity” or “undertaking the development or letting of commercial property”. Osborne announced: “To end the speculation and uncertainty and to provide stability, I confirm that I will be making no further changes to the taxation of non-domiciles in this Parliament.”

Therefore, the Treasury expects 3,500 people to move to the arising basis, yet a 2,200 increase overall in people paying the remittance charge. This suggests that it expects 5,700 new people to pay the remittance charge in 2012-13. The number of people paying the remittance charge in 2008-09 – the first year – was 5,400. This became the estimated 7,400 in 2011-12. Having seen a net rise of only 3,000 people paying the remittance charge in three years, it seems optimistic there will be 5,700 new people willing to pay the fee, especially considering 3,700 non-doms will have to pay the £50,000 charge.

The consultation document says: “It is expected that the higher charge will be paid by long-term resident non-domiciles who have overseas income and capital gains of at least £100,000 in a tax year”. The government justifies this policy decision because it “believes that those who have been here the longest, enjoying the benefits offered by the UK’s economy and society, should make a greater contribution than the current £30,000 charge to reflect their closer connection to the UK”.

The policy will yield around £80m a year, according to the consultation document; this compares with the Budget book, which puts the yield at £110m in 2013-14, £70m in 2014-15 and £50m in 2015-16.

Fresh benefits

Under the new rules, individuals will be allowed tax-free remittance for investment in businesses that are “carrying out trading activity” or “undertaking the development or letting of commercial property”. The consultation says the government “recognises that non-domiciles often want to invest in commercial property” and its conclusion “will broaden the appeal of the incentive”. There will be certain exclusions for holding and letting residential property as some people could abuse this through using it to buy property in which they live, the consultation states.

For fresh ideas, new possibilities and a value driven service go to Garside & Co LLP Chartered Accountants in London.

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