HM Revenue & Customs will be taking a hard look at the tax affairs of the UK’s non-domiciled, UK-resident individuals once new non-dom rules take effect next April, a London-based non-dom tax expert is warning.
Mark Davies, managing director and founder of Mark Davies & Associates, made his comments in the wake of a seminar for advisers held last Friday by HMRC, which had been arranged to brief industry practitioners on the compliance and technical aspects of pending reforms to the UK’s domicile legislation.
According to Davies, non-doms changing their domicile or resident status at any time over the next two years “will likely be subject to checks, and may also be called to meetings with HMRC”, in what he says is likely to be a period of “unprecedented” scrutiny on such individuals.
As reported, a number of changes to the non-dom rules are being implemented from 6 April 2017, many of which are complex and which will oblige most non-dom individuals wishing to live in the UK while maintaining their non-dom status to take steps to ensure they don’t inadvertently falling foul of them.
Among those being targeted by the new rules are so-called “boomerang non-doms”, who typically were born in the UK and have a British domicile of origin, left long enough to acquire a domicile of choice abroad, but now are seeking to be resident in the UK while at the same time retaining their acquired non-dom status.
Additionally, those who’ve been UK resident for at least 15 out of the previous 20 tax years will, under the new rules, now be deemed UK domiciled, while the so-called “remittance basis” of taxation – whereby UK residents who are not UK domiciled may pay UK tax only on income and gains from UK sources, and on only such foreign income and gains they remit to the UK – will no longer be available to people who, until now, have been able to take advantage of it. The inheritance tax provisions for non-doms is also being changed.
Davies says that alongside introducing these and the related changes it’s introducing, “HMRC is stepping up its examination of anyone claiming non-domicile status, both long-term and more recent”.
“Any non-doms claiming for the first time that they are non-UK resident will be expected to provide detailed evidence of their travel movements,” he adds.
“This is a complicated area, and it is easy to make mistakes.
‘More detailed questions’
“Meanwhile, anyone with a less than watertight domicile of choice will face even more detailed questions than previously on their lifestyle and financial arrangements.”
Davies says he and other advisers active in the non-dom advice sector are concerned that many people who will be affected by these changes are unaware that they’re coming, which matters because, in some cases, they will need to begin taking steps soon to prepare for them.
“We are already seeing mistakes [being made] by people [who are] declaring themselves non-resident, without taking into account the split year rule,” he says, referring to pending changes in the way an individual’s time in the UK during a particular tax year is calculated.
He says there should be a push, now, to encourage those who are non-dom and who wish to retain this status to get advice as soon as possible.
To read more about the proposed changes to the non-dom regime, on the UK Government’s website, click here.