Non-domiciles should undertake essential tax planning before April 6th 2008
- Tips for non-domiciles could save tens of thousands of pounds of tax
Non-domiciled UK residents can reduce their tax bill by thousands of pounds by undertaking some basic tax planning before new rules on residence and domicile come into effect on April 6th 2008, says Wilkins Kennedy, the accountancy firm.
Under the existing rules, UK resident non-domiciles are taxed on overseas income or gains which are remitted to the UK. From April 6th 2008, UK non-domiciles who have been resident in the UK for seven out of the last nine tax years will be taxed on their world-wide income and gains unless they pay an annual charge of £30,000.
According to Wilkins Kennedy, following publication of the draft legislation on residence and domicile (18/01/08), non-domiciles have a window of just a few weeks to take advantage of the existing regime and restructure their overseas assets, thereby reducing the amount of extra tax they will have to pay from April 6th 2008.
Wilkins Kennedy says that the new non-domicile rules will not just hit oligarchs but many families on modest incomes as well.
Peter Goodman, Senior Tax Partner, Wilkins Kennedy, comments: The new tax regime for non-domiciles is a radical overhaul and goes much further than the highly-publicised £30,000 annual charge which grabbed headlines at the Budget. For example, non-domiciles who elect to pay the £30,000 charge will discover that many of the existing techniques by which they have been able to remit funds to the UK without paying tax will no longer be effective.
One of the pitfalls arising from the draft legislation is that every non-domiciled family member will be within the new regime, even children! So the amount of tax planning each family will have to undertake is potentially very daunting.
Wilkins Kennedy says that non-domiciles should consider the following four steps to reduce their tax bills before April 6th:
For individuals with substantial overseas income and gains consider transferring assets to one member of the family, so that only a single £30,000 charge is payable.
Consider gifting overseas income to spouses and relatives to their non-UK bank accounts. This can in certain circumstances allow subsequent remittances of such sums to the UK to be made tax free.
Convert income to capital assets. Non-domiciles should consider switching income generating investments to capital growth assets offshore. The new 18% flat rate capital gains tax regime will make the tax charge on the sale of capital assets considerably less than the tax payable on investments producing income. Offshore bonds could be attractive in certain circumstances.
Considering re-basing the value for tax purposes of existing capital assets and property before the new regime starts. This will assist in reducing the exposure to capital gains at a later date. However, this is a complex matter and expert advice should be taken.
ENDS.
Press enquiries:
Peter Goodman
Partner
Wilkins Kennedy
Tel: 020 7403 1877
Paul Arvanitopoulos or Nick Mattison
Mattison Public Relations
Tel: 020 7645 3636
