Foreign matters

Domicile is a complex concept, which is not related to tax residence or any commonly understood concepts of nationality. There are many individuals living and working in the UK who are not domiciled here, and those who own Premier football clubs are in the vast minority.

Non UK domiciled individuals are taxed on their income and gains arising abroad only to the extent that they bring the proceeds to the UK. This is known as the remittance basis. Much comment in the national press about the tax advantages available to non domiciled individuals relates to this favourable treatment. If the individuals were UK domiciled they would pay UK tax on all income and capital gains, wherever in the world it arises.

In an announcement that had suspicious parallels with the announcement by the opposition the previous week, the Chancellor announced changes to the taxation of non domiciled individuals last week. From the next tax year, those who have been resident in the UK for seven years and who wish to continue to pay tax on foreign income and gains on a remittance basis will have to pay a £30,000 tariff each year. This tariff will be in addition to the tax on remitted income and gains, and no personal allowances will be available to use against that income. Those who decide not to pay the tariff will be taxed on the same basis as domiciled individuals.

Should the "ordinary" person be worried about this? Many of those who are domiciled abroad are working in the UK and sending money home to support families abroad. They will never benefit sufficiently from the special rules to make it worth paying their £30,000 contributions, so will be forced to opt for the normal UK basis of taxation. This would mean that all income earned abroad would be taxed in the UK in future, and even worse, were they to purchase a house for relatives to live in, they would also be liable to UK tax on any profit on the sale of the house. Although there are de minimis rules, it is likely that some will be very disappointed when they realise the impact of the change in the law.

In a second change, which was not very widely publicised, HMRC will now regard days of arrival and departure in the UK as days present in the UK, rather then not present here for the purposes of deciding how many days a non resident individual has spent here. Those who live abroad but visit the UK will need to plan their visits to the UK carefully, taking into account the change in the rules.