Non-domiciled: our worst non-UK domiciliaries tax nightmare is happening

Published 2007-10-25 19:28:35

British Tax - Inlande RevenueIn April 2007, non domiciled residents had a warning: filling in a self-assessment tax return they were, for the first time, asked to declare on what date they changed their domicile. They will also have to confirm if they have ever been domiciled in the UK as well as stating the date on which they came to live in the UK.

Following the proposal of the Conservative Party to tax non-domiciled residents, saying they would levy a fixed £25,000 annual charge on anyone claiming non-domicile status, the Labour government had been under pressure to bring in new legislation.

In order to assess the impact of what is currently only a pre-budget proposal, Adexpat gives us the following explanation.

The 2008/2009 pre-budget report unveils a significant will to levy tax on resident but non uk-domiciled expatriates who have earnings arising abroad, untaxed in the UK under the combined non remittance and non domicile rules.

The pre-budget states that the plans are to amend quite a few rules, and we have highlighted the most relevant:

1. The calculation rule for days of presence in the UK : The day(s) of arrival and departure will now have to be included in the total.

As we understand it, this means that people coming on Monday and leaving on Friday who used to be regarded as spending 3/7 days in the UK will now spend 5/7 days in the UK , and very likely more than 183 in a tax year.

2.  7 year rule
Anyone reaching or having previously reached 7 years in the UK will be taxable on their worldwide income, unless they choose to use the remittance basis rule and pay a 30.000 GBP fixed tax charge. In short, you will need to earn a lot to reckon that the 30.000 GBP tax is a light bite. For the rest the 40% bite may be a massive one.

3. The definition and rules for Remittance will be reviewed in order to increase the scope of income liable to tax.

Using the year of remittance versus the year an income arose will not be accepted anymore

The Source ceasing Rule will disappear

4. Non domiciled IT Contractors (or else) using Channel Islands schemes via trusts to legally convert their income into non taxable income may lose that benefit.

This is only a pre-budget, but it sends a strong enough signal of what is to come.

Although it is quite difficult to quantify the impact on expatriate demography, it will clearly make the UK a lot less attractive to many high earners as the UK income tax rate is quite high, and the cost of living in London the highest in Europe .

And as I heard this morning if the money is not there anymore, why not choose quality of life instead!

This article is not a legal statement and should only be read as a view expressed by the writer.

For further information contact

For more explanation about the status of non-domiciled, you can read the Guardian:

"The non-domicile rule is a distant echo of empire. It allows some residents of the UK to cite some other country as their real domicile and then, unlike all other residents, to pay UK tax on their earnings in the rest of the world only if they "remit" the money to the UK.

And read about the current status on the Inlande Revenue website.


Author: EasyExpat
Community Manager

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