Non-dom system needs real simplification

The Chancellor’s announcement in today’s Budget about increasing the levy on UK residents who are not domiciled in the UK needs to be balanced by a real assault on the complexity of the system, says the Chartered Institute of Taxation (CIOT).

Today the Chancellor has:

• announced an increase in the £30,000 annual charge to £50,000 for certain longer-term residents;
• removed the tax charge where remittances are made for commercial investment in the UK;
• promised to simplify some of the rules around the remittance basis; and
• announced that no further substantive changes will be made during the current Parliament.

John Whiting, Tax Policy Director of the CIOT said:

“It is up to the Chancellor to judge the appropriate level of the non-dom charge, but what is really needed is a simpler, more certain basis for the levy. The exemption for commercial investment is eminently sensible and the promise of a review of the complexities in the remittance rules is welcome. But in many ways we think the remittance rules are so overcomplex as to really need a complete rethink.

“There is a lot to be said for complementing the plan to introduce a statutory residence test with a review of the domicile rules.”

Notes for editors

1. The remittance basis for those not domiciled in the UK was much restricted by the Finance Act 2008, which introduced the £30,000 annual charge for users of the remittance basis who have been resident in the UK for seven out of the last nine years.

2. The Chancellor announced today that the £30,000 annual charge will be increased to £50,000 for those non-domiciles who have been UK resident for 12 or more years and who wish to continue to use the remittance basis.

3. The Chancellor announced consultations on these changes, to take effect from April 2012.