New exemption for non doms from 2012

Exemption for remittances to the UK One of the biggest changes announced a couple of weeks ago will be the introduction of an exemption for remittances invested in UK businesses. This will allow non doms to bring foreign income or gains into the UK without this being taxed as a remittance. The current proposals for this relief are:

It will apply only to investments in companies

The company doesn't have to be UK resident (but in practice it is likely to be)

The business needs to be either a trading business or one of holding/developing commercial property

UK residential property businesses won't qualify

Investments can be either as shares or loans

Qualifying remittances won't be taxed

There is no minimum or maximum investment

There will be anti avoidance rules to prevent abuse of the rules. For instance once the investment is sold (eg shares sold or loan repaid) the cash needs to be taken offshore within a short period otherwise the original remittance would be taxable.

Remittances don;t just have to come from the non dom. They can also benefit from the exemption if they are routed through offshore companies or trusts.

There will be no connection restrictions (unlike the EIS scheme for instance). This means the non dom can be an employee etc of the company. There will though be rules to prevent an investor taking non-commercial payments from the business as a way of converting their investment into tax-free money used for personal, rather than commercial, purposes

The relief can still apply to investments in an offshore company which has a UK permanent establishment. This relief is likely to be of huge benefit to many non doms who use UK companies in particular for trading.