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Taxation of Non Domiciled Persons in the UK

by Robin Sykes

As the government proposes some tweaks to the system of taxation for non UK domiciled persons, this tax adviser wonders whether the currents rules and the consultation miss the point and so whether wider reform should be considered.

The publication of a government consultation document regarding proposals to restrict access to the Remittance Basis of taxation shows that international tax issues continue to receive much government attention.

If implemented, the changes would deny use of the remittance basis completely for very long term residents and persons who were UK domiciled at the time of their birth. This comes after long term use of the remittance basis was made more costly for long term UK residents by the introduction of the Remittance Basis charge in 2008.

Measures to restrict the availability or advantage of the remittance basis for long term UK residents are in line with its intention, which is to simplify the UK tax affairs of persons coming to the UK for a short time in order to live, work or do business.

However, I wonder whether the proposals are a retrograde step and whether wider reform should be considered.

The difficulty with domicile

Domicile is a famously fuzzy concept that wasn't specifically designed for determining taxation and can differ based on the life long intentions of the taxpayer's parents whilst he was a minor. For example, if a person intends to leave the UK "at some point in their lifetime", they, and their children, may not acquire a UK domicile.

This often means that a person may be born and raised in the UK but could still arguably use the remittance basis because of the circumstances of, and choices made, by his parents – rather than the choices made by him as an adult. The reverse can also occur – denial of the remittance basis due to circumstances over which the taxpayer had no control.

Rather than seeking to address this distinction, the proposed changes exacerbate it and make it explicit. If enacted, if a person is born in the UK and is UK domiciled at birth then regardless of how he lives his life as an adult, he will never be able to use the remittance basis.

Wider change needed?

Unlike some politicians, I think it makes sense to allow short term residents the simplification (and, yes, the UK tax advantage) of keeping overseas income outside the UK tax system. Otherwise, coming to the UK for even a short time to work or do business, could be very complicated and costly.

However, I am not sure that the concept of domicile is a fair and logical means of determining eligibility to access the remittance basis. It is uncertain, it is not always based on choices made by the taxpayer and is not aligned with length of residence in the UK which is the stated logic behind the remittance basis.

Rather than tinkering with the concept of domicile, I wonder whether we shouldn’t just abolish the link between domicile and tax altogether.

Align criteria with policy aims

If the intention of the remittance basis is to provide a simplification for short term residents then its criteria should be just that – the length of tax residence in the UK.

Potentially opening the remittance basis up to UK domiciled persons would naturally force the government to establish more logical disadvantages to the remittance basis rather than the arbitrary charges currently in force.

If nothing else, it simplifies the system rather than adding more complexity and moves a step towards treating people based on the choices they make as an adult rather than where they were born or what their parents did when they were a baby or before they were even born.

A perfect answer to the taxation of "non doms" or short term residents, of course, does not exist but I believe that the wider reforms considered in this article would get us nearer to achieving both the aims of the remittance basis and a fairer system of taxation than tinkering with the outdated notion of domicile ever will.

Note from the author

International tax is an interesting topic. Continual changes and increasing applicability of international issues to taxpayers mean it has never been more important for advisers to have some understanding of international tax.

With this in mind, I recently wrote a course called International Taxation of Individuals which, unlike the article above, provides a practical introduction to international tax rules and treatments which can be applied in practice to determine the tax issues and liabilities in many situations.

Robin Sykes CA CTA

Robin Sykes an independent tax adviser who advises accountants and other professionals on tax issues affecting their clients. He can be contacted via


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