Wednesday March 12, 03:40 PM
UK BUDGET Darling confirms non-dom tax regime to take effect in April
LONDON (Thomson IM) - UK Chancellor of the Exchequer Alistair Darling said during his maiden Budget speech that it is 'right and fair' to establish a tax regime which targets non-domiciled individuals.
He said that the regime - which includes a 30,000 stg annual charge on foreign income and gains they leave outside the UK - will apply after seven years of operating business in the UK and will take effect from April this year.
The measures have been predicted to hit the hedge fund industry hard. Before the budget speech, the Alternative Investment Management Association (Aima) urged the Treasury to reconsider its planned measures to tackle non-doms.
In a letter responding to the Treasury's consultation on residence and domicile, Aima said the measures could result in a reduction in overall UK tax revenues by causing non-UK domiciled hedge fund managers to relocate to other jurisdictions, and put others off setting up hedge funds in the UK.
The 30,000 stg charge will be income tax or capital gains tax and treated as such in accordance with double taxation agreements, the statement said.
This tax will also be available to cover gift aid donations.
However, the charge will not apply if these individuals' un-remitted foreign income and gains are less than 2,000 stg per year.
In addition, people using the remittance basis of taxation will no longer be entitled to personal allowances, unless again they have un-remitted foreign income and gains of less than 2,000 stg per year.
The budget statement said: 'Loopholes and anomalies in the remittance basis rules will be removed, to ensure that the remittance basis works as originally intended and can no longer be used as a vehicle for avoiding UK tax. Income and gains of offshore trusts will be taxed only when they are remitted to the UK, even if these relate to UK assets.'
The government has already made some concessions from its original proposals and will no longer ask for detailed information about offshore trusts, and will not tax works of art brought into the UK for public display or money brought into the UK to pay the levy.
Darling told parliament today that there would be no additional change to this legislation in this parliament or next.
He added that the government 'will continue to be vigilant against tax avoidance and ensure fairness for all tax payers'.
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