HMRC Q&A's on 2009 Budget Changes for Non Doms
24/06/2009
We looked at the 2009 budget changes for non doms in a previous article (Non Doms and the 2009 Budget). However, HMRC have provided some guidance as to how the new provisions will apply. In this article we look at the impact of the changes taking into account the recent HMRC guidance. Key changes in the 2009 Finance Bill for Non DomsThe main changes that will effect non doms are as follows: Individuals on low income The Finance Bill introduces a new tax exemption for foreign individuals on low income who take employment in the UK and who also have income from a job overseas in the same year. Its effect will be to remove the obligation to file a Tax Return in order to claim double taxation relief on the overseas income. Who can take advantage of this new exemption? The exemption is available to individuals who: are UK resident but non UK domiciled
have only overseas employment income of less than £10,000 and overseas bank interest of less than £100 per tax year
have all of the foreign income subject to tax overseas. These individuals will not be liable to pay UK tax on that overseas income, nor to complete and file a Self Assessment Tax Return unless they are required to do so for some other reason - such as having untaxed UK investment income. When does this exemption come into effect? The exemption applies to overseas employment and savings income for the tax year 2008--09 and subsequent tax years. Is it necessary to have paid tax in another country on the overseas income? No. Although 'subject to a foreign tax' might in some circumstances mean that the individual is required to pay tax on the income abroad, this is not a necessary requirement to take advantage of this exemption. As a result of overseas personal allowances, or provisions akin to such allowances, or of a tax rate of 0 per cent, there might be no requirement to pay tax on part or all of the income. However, such income would still be considered to be 'subject to a foreign tax' in the context of this exemption. Non doms with unremitted income or gains of less than £2,000The finance bill clarifies that non doms with small amounts of overseas income and gains are not required to file a Tax Return in order to use the remittance basis. Who will be affected by this change? This clarification applies to individuals who: are resident but non UK domiciled (or non UK ordinarily resident) and
have overseas income and gains of less than £2,000 in any tax year which is not remitted to the UK. These individuals will not be required to complete and file a Tax Return in order to use the remittance basis of taxation. Individuals with small amounts of taxed UK investment incomeThe rules which require an individual to file a Tax Return in order to use the remittance basis are relaxed with regard to non doms whose UK tax liability for a year arises only from small amounts of taxed UK investment income. Where they meet certain conditions, they will not be required to file a tax return to use the remittance basis. Who will be affected by this change? This provision applies to individuals who are resident but non UK domicile (or non ordinarily resident), and who have less than £100 of UK taxed investment income in any tax year, provided they have no other UK taxable income in that year.
These changes apply as from 2008--09. Relevant persons and close companiesThe 'relevant people' rules ensure (amongst other things) that non doms who transfer overseas income or gains and allow other UK family members to benefit could still be taxed as if it was a remittance. The rules don't just class individuals within the definition of 'relevant people' and also includes close companies and trusts. The Finance Bill clarifies the definition of a relevant person for these purposes and ensures that references to a close company also include subsidiaries of such companies. This rule came into effect from 22 April 2009.
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