In Budget 2011 the Chancellor announced reforms to the taxation of non-domiciled individuals. Following the completion of a period of consultation the majority of new measures are included in Finance Bill 2012 and will be effective for the tax year 2012/2013. Additional simplification measures will be enacted in Finance Act 2013.
I set out below a summary of the key changes:
- An increase in the remittance basis charge (RBC) to £50,000 for long term UK residents who have been here for 12 out of the last 14 years. A lower charge of £30,000 still applies to those individuals who have been here for 7 out of the last 9 years. Payment of RBC means that an individuals will be subject to UK tax on UK source income and any remittance of overseas income or gains; However, remittance of foreign income or gains to pay RBC is not separately chargeable to UK tax;
- Tax relief for commercial investments in UK businesses (inward investment). An individual will be able to remit overseas income and gains without charge to UK tax for inward investment in private UK trading companies subject to eligible conditions. There are no lower or upper caps on the amount of relief that can be claimed and it does not effect entitlement to other tax reliefs;
- Simplification of existing rules relating to sales of exempt property, nominated income (foreign currency) and maintaining foreign currency bank accounts which are removed from the scope of capital gains tax. Under current rules foreign currency bank accounts are treated as chargeable assets for capital gains tax purposes. This means that a withdrawal from such an account constitutes a part disposal on which a capital gain or loss could arise. The calculation of the gains was complex and administratively burdensome in contrast to the amount of tax raised; and
- Also, there will be no tax charge under RBC where an individuals brings property into the UK and in turn gifts it to the nation;