A taxpayer has every right to expect the law to be clear and certain. This is definitely not the case under the proposals for changing the laws of residence and domicile. The Chartered Institute of Taxation (CIOT) believes that the Government has a golden opportunity to introduce a comprehensive, statutory residence test based on objective criteria, such as day-counting. This would afford much needed certainty in what is currently a very grey area.
Furthermore, in common with many other professional bodies and organisations, the CIOT advocates a 1-year delay in implementing the proposed legislation affecting foreign domiciliaries.
Rob Ellerby, CIOT President, says: “The current proposals governing foreign domiciliaries are causing much confusion both for those who are affected and for those who are providing advice to such people. The draft legislation which was published in January is deficient, a fact that HMRC now accepts.”
In a series of meetings in the last few weeks, HMRC officials have been promising changes to these proposals. However, these unpublished announcements have created confusion as no-one is clear which proposals are to be proceeded with and which are to be dropped.
Rob Ellerby adds: “Because people affected by the proposed legislation are faced with making life-changing decisions, the CIOT considers that the only sensible approach is to defer the implementation of these measures, in particular those in respect of non-UK trusts and non-resident companies, for a year. This will allow proper consultation to take place with a view to producing workable legislation.”
We believe that, starting with these provisions, we need to move to a situation where significant changes in tax law are consulted upon in advance, with Government being prepared to expose its blue-skies thinking, then its broad proposed direction of change, then the draft legislation - all in advance of the changes coming into force. The more people understand what the Government's thinking is and the more opportunity the Government has to reflect on views and representations, the greater the likelihood of producing better quality law reflecting the difficult choices involving fairness, efficiency and simplicity.
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Notes to editors
The comments of the CIOT on the Residence & Domicile draft legislation and explanatory notes published 18 January 2008, sent to HMRC on 28 February 2008, are available to download here in Adobe (pdf)format . The draft legislation and explanatory notes are also available here.