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Following an announcement from the treasury yesterday, the media have today hailed a supposed "climb-down" by the chancellor Alistair Darling on the reform of non-dom taxation.
The actual terms of this "climb-down" are set out in a letter by David Hartnett, the acting chairman of HMRC.
The wording is vague and only offers the following minor concessions.
Sadly, the above will not prevent any non-doms from leaving the UK; and if there is no clear clarification of the rules within the next 2 weeks; all clients will have to go ahead with restructuring and most will prepare to leave!
The reasons why people will leave are that most hold their assets in offshore trusts which will now be subject to UK income tax and UK capital gains tax (mainly) in the tax year the gains or income arises, even if they pay the £30,000 annual charge!
Offshore trusts are used to avoid UK inheritance tax and the new rules do not affect this!
[There is a rumour that the treasury have indicated that they are prepared to backdown on subjecting assets in offshore trusts to UK capital gains tax. In other words, to preserve the exemption from capital gains tax that assets held in offshore trusts currently benefit from!]
My general view is that it is worth waiting a week or so, to see if this rumoured concession emerges.
If it does, then many non-doms can stay and may not need to undertake substantial re-structuring of their offshore trusts and other assets.
If it does not: then there will approximately 4 weeks to re-structure and for most to take up residence elsewhere.
Although Switzerland is often mentioned;
and Spain are all options.
and Portugal are also worth considering.
Monaco can also be used in the right circumstances (but with caution, due to the new rules on residence to which no "climb-down" has been mentioned!)
Daniel is a Barrister who heads Strategic Tax Planning, a Tax Law Consultancy that has as one of its specialities UK, International and Offshore Tax Planning for both high net worth individuals and corporate clients. This includes both structuring for UK clients investing in property abroad and UK property acquisitions for foreign investors. His advice is sought after by many accounting and law firms around the UK and overseas.
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