Members of the Chartered Institute of Taxation (CIOT) have raised concerns about the government’s proposals to reform taxation for non-domiciles, as they fear it could lead to an unfair result for those born in the UK who spend most of their lives abroad, but later return.
A new Treasury consultation document has proposed that individuals born in the UK and classed as UK-domiciled at birth will not be entitled to claim that they are not domiciled for tax purposes while they are living in the UK.
For long-term residents of the UK, this new measure will mean that they can no longer claim to be not domiciled for tax purposes; effectively abolishing the permanency of non-dom status.
The document states: “The government… intends that any individual who is born in the UK and has a UK domicile of origin should not be able to claim non-dom status while they are living in the UK, even if they have left the UK and acquired a domicile of choice in another country.”
According to the CIOT, the introduction of the place of birth element of the rule introduces complexity into an already complex area.
“Among the new proposals, the stricter regime for those born in the UK seems unduly harsh,” said Aparna Nathan, Chair of the CIOT’s capital gains tax and investment income sub-committee. “Attaching such importance to a place of birth, which is clearly outside the individual’s control, and could be a matter of happenstance, is curious.
“As the proposal stands, a UK-born person who returns to the UK to look after ageing relatives or to take up a temporary secondment will become deemed UK domiciled from the first tax year,” Nathan added.
“As a result, they will have to pay UK income tax and capital gains tax on their worldwide income and gains, and UK inheritance tax on their worldwide assets. This seems an unduly onerous consequence of their place of birth combined with what might be a relatively brief period of UK residence later in life.”
The government is expected to release its final legislation on non-dom tax rules in the near future.
PAYE legislation is changing from 5 April 2016, so employers who intend to or are already payrolling benefits and expenses must register with HMRC using the new online Payrolling Benefits in Kind (PBIK) service.
Businesses will be required to align their existing payroll software and register to payroll using the new service. After this date companies will not be able to register for the 2016/ 2017 tax year as HMRC cannot process changes in-year.
In order to avoid being sent multiple tax codes, businesses will also need to register before the annual coding process, which usually starts around 21 December.
In addition, P11D (b) forms must still be completed, including the total benefits and expenses provided, whether or not they have been put through the payroll.
However, if employers payroll car and fuel benefits, they must not complete P46 (Car) forms as they are deducting the tax at source that is due on these benefits.
The only benefits that cannot be payrolled using this new service are:
vouchers and credit cards
interest free and low interest (beneficial) loans
These must still be registered using the P11D form in the usual manner.
Before making the first main relevant payment to an employee in a tax year, businesses need to calculate the cash equivalent of the benefit.
They will then be required to determine the number of payments to be made to the specified employee in the tax year and divide the cash equivalent by the total number of payments to be made.
The resulting amount is the taxable value of benefit, which should be added to the payroll each pay cycle as a notional value. It is then necessary to deduct or repay tax as usual by reference to the employee’s code, even if this is the subject of an objection or appeal.
These changes bring with them an additional burden for businesses and some may need to seek clarification ahead of the change.