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HMRC Acting Chairman Dave Hartnett has issued a letter clarifying some issues regarding the current Residence and Domicile Consultation.

The letter, which has been posted on the HMRC website is reproduced as follows:

"RESIDENCE AND DOMICILE CONSULTATION

The Government’s consultation on changes to the tax rules on residence and domicile closes on 28 February. In the meantime, there are 4 issues that have been raised, where I want to make clear what the Government’s intention has always been and how it will be set out in the legislation to be brought forward.

Under the current rules non-domiciles are able to enjoy the benefits of the remittance basis of taxation. This ensures that they need only pay UK tax on their foreign income when they remit it to the UK.

The Government recognises the positive contribution of the remittance basis to UK competitiveness and is committed to retaining it. However, there are issues of fairness, which need to be addressed. First, the fact that people can be resident in the UK over the long term without making any contribution in respect of income they leave abroad. That is why the Government is introducing a £30,000 annual charge for taxpayers resident in the UK for more than 7 years who want to carry on using the remittance basis. Second, loopholes in the current rules mean that income can often be remitted without being taxed. That is why the Government is taking action to close these loopholes.

These reforms, announced in Pre-Budget Report 2007, retain the remittance basis while enhancing its long-term sustainability and maintaining the competitiveness of the UK as a place to work and do business.

The consultation process will run to 28 February. However, I want to make clear that the Government’s intention – which will be set out in the legislation to be brought forward – has always been to ensure that:

• those using the remittance basis will not be required to make any additional disclosures about their income and gains arising abroad. So long as they declare their remittances to the UK and pay UK tax on them, they will not be required to disclose information on the source of the remittances;
• there will be no retrospection in the treatment of trusts and the tax changes will not apply to gains accrued or realised prior to the changes coming into effect;
• money brought into the UK to pay the £30,000 charge will not itself be taxable; and
• it will continue to be possible to bring art works into the UK for public display without incurring a charge to tax.

In addition, we will continue to discuss with the US authorities how the £30,000 charge can become creditable against US tax."

Link

HMRC letter