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New proposals for residence and
domicile
2008 Budget update:
In his Budget on 12 March 2008 the Chancellor
announced that these proposals would be included in the 2008 Finance
Bill, with the modification that the de minimis limit for non-remitted
foreign income and gains would be increased to £2,000.
HMRC has published more detail on the amendments to the residence and
domicile tax rules which were announced in the 2007 Pre-Budget Report,
as follows:
- draft
legislation covering day counting and the remittance basis of taxation
(including the £30,000 charge and personal allowances for those
claiming the remittance basis);
- explanatory
notes in relation to this draft legislation;
- a number of frequently
asked questions and corresponding answers explaining the proposals.
The documents are part of the HM Treasury consultative document
'Paying
a Fairer Share - a consultation on residence and domicile' which
was published on 6 December 2007.
The new provisions will make a series of changes to the current rules:
- the residence rules will be amended, so that days of arrival in and
departure from the UK will count towards establishing residence;
- individuals who are resident but not domiciled, or not ordinarily
resident, in the UK will be required to make a claim in order to access
the remittance basis of taxation for income and chargeable gains unless
their unremitted foreign income and gains are less than £1000
. Individuals who opt for the remittance basis will lose their entitlement
to personal allowances and the capital gains tax annual exempt amount;
- individuals who are resident but not domiciled, or not ordinarily
resident, in the UK for longer than seven out of the past 10 years will
only be able to access the remittance basis of taxation on payment of
an annual charge of £30,000, unless their unremitted foreign income
and/or gains are less than £2,000;
- the current rules will be amended to remove flaws and anomalies that
allow individuals using the remittance basis to avoid paying tax on
foreign income and gains where it is properly due.
The amendments in the draft legislation are to be put before Parliament
in the 2008 Finance Bill. Subject to the Bill becoming law they will
(broadly) take effect from 6th April 2008. HMRC note that the draft
legislation published today is not in its final form. It says that
"Further amendments will need to be made to it, so it should
be regarded as work in progress."
Please contact Don Fisher if you would like to discuss the implications
of these proposals for you.
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