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Con-Libs pledge non-dom tax review

The taxation of non-doms is to be reviewed, the government announced today

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Both parties had committed to change the tax rules for non-doms, which were only revised two years ago by then Chancellor Alistair Darling, who abolished a special tax status that allowed them to keep overseas income and gains out of the UK net, provided they did not ‘remit’ it to the UK.

Instead, non-doms were made to pay tax on their worldwide income and gains or pay a £30,000 annual fee in order to maintain the ‘remittance basis’.

However, non-dom taxation has continued to be a political hot potato, not least because both Labour and the Conservatives have high-profile non-dom backers, foremost among them Tory deputy chairman Lord Ashcroft, whose main business interests are domiciled in Belize.

The government’s pledge to review non-dom status suggests the parties have yet to reach agreement on a course of action. In their election manifesto, the Lib-Dems had vowed to scrap non-dom status after seven years of UK residence, while the Conservatives promised to replace the current system with an unspecified flat rate levy. 

David Kilshaw, KPMG head of private advisory, said:  “Non-doms will hope that any further review of the tax rules will be on the basis of proper consultation and a sensible time frame for any proposed new legislation.  

“There may be a grain of hope that this may be a positive development and that the frankly unworkable current rules might be amended especially the definition of remittances  by family members and the treatment of non-sterling bank accounts.

“What we need more than anything is stability not another raft of small-print.”

Meanwhile, a spokesperson from law firm Macfarlanes said there is no real indication as to what form the review will take or even when it will properly begin, let alone when any changes may be introduced.

“The evidence of the programme published yesterday suggests that there is a lack of detail on the issue at present which means it is unlikely to be tackled in any substantive way in the government’s first budget to be held on 22 June,” said the spokersperson. 

“This is perhaps welcome at a time when it is likely that attention will need to be given to proposals for changes to the taxation of capital gains.  It will nevertheless be important to keep an eye on the progress of the review of the taxation of non-domiciled individuals and to ensure that the advisory industry is properly consulted and involved in the process so that any changes which eventually are implemented can be introduced in a more considered and coherent manner than the changes which were rushed through in 2008.”

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