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The Chartered Institute of Taxation (CIOT) has welcomed government clarification concerning foreign domiciliaries (non-doms), which should help advisers to advise their clients on the impact of the proposed legislation due to take effect from 6 April 2008. 

The CIOT believes that the new announcement in the form of a letter from Dave Hartnett, HMRC acting Chairman, is certainly a step in the right direction. The Institute had serious concerns about retrospection, discrimination and the penalising of trusts compared with personal ownership, but the HMRC letter appears to address many of those issues.

Emma Chamberlain, Chairman of the CIOT’s Succession Taxes, says: “The proposals which will operate from April 2008 remain extremely complex and it is not possible to give clear advice to people about legislation which will be law in 7 weeks time.  This in itself is obviously unsatisfactory.  Much of the devil will be in the detail of any amended legislation.”

John Andrews, Chairman of CIOT’s Low Incomes Tax Reform Group, says: “Far from clarifying matters the new announcement muddies the waters further for students, migrant workers and other very short-term visitors to these shores.  The situation of the millions of non-doms who are not wealthy (but affected by these provisions) have been ignored and their lives will be made far more difficult by these ill-considered proposals.”

The CIOT believes that it would be sensible to delay introducing some of the changes until April 2009.  This would give time for advisers and taxpayers to be able to understand and comply with the new rules and ensure that the drafting works as intended.

Emma Chamberlain adds: “The CIOT has long argued for proper consultation before proposals such as these are implemented.  It is in everyone’s interests to see the tax system work properly.  Linked to the whole question of domicile is the issue of residence since both UK and non-doms (whatever their wealth) need to know whether they are within the UK tax net in the first place.  For some time the CIOT has favoured a comprehensive statutory residence test similar to that adopted in Ireland.  We would suggest that a proper consultation takes place on the legislation governing domicile and residence with a view to introducing provisions from April 2009.”