Non-domiciles
CHANGES TO THE TAXATION OF NON-DOMICILED INDIVIDUALS
6 June 2012
HMRC have published an Information Note which explains changes to the remittance basis of taxation from 6 April 2012.
PROPOSALS TO SIMPLIFY THE TAXATION OF NON-DOMICILED INDIVIDUALS
22 October 2012
The government has published their response to the consultation on reforming the taxation of non-domiciled individuals.
The original consultation was published in June 2011 and proposed making technical simplifications to some aspects of the current remittance basis rules to remove undue administrative burdens. The changes aim to make the implementation of SP1/09 in statute more workable, clearer, and less restrictive. SP1/09 applies to employees who: are resident but not ordinarily resident in the UK; are taxed on the remittance basis; and carry out duties both in the UK and overseas under a single contract of employment. Such individuals will typically have their employment income paid into a single overseas bank account. This will by definition hold a mixture of UK and overseas earnings which will mean that it is a ‘mixed fund’ for the purpose of the remittance basis. Mixed funds are accounts containing more than one kind of income, capital gains or capital, or containing income, and/or capital gains and/or capital from more than one tax year. There are statutory provisions setting out how money or other property within a mixed fund is to be treated for tax purposes. The mixed fund rules operate on a transaction by transaction basis. This single overseas bank account will normally be used to fund their day-to-day living expenses, resulting in a very large number of transactions within a single tax year. Therefore a strict application of the mixed fund rules would be administratively complicated for individuals in this position. The purpose of SP1/09 is to provide a simpler alternative to the mixed fund rules for those who meet the relevant criteria. Under SP 1/09, such individuals can calculate their UK tax liability by reference to the total amount transferred out of their overseas account during the tax year as a whole, rather than by reference to each individual transaction.
The proposal to place SP1/09 on a statutory footing was broadly welcomed in the responses to the consultation, as it is widely used by expatriate employees and their employers.
The legislation providing for the special mixed fund rules will only apply where an individual meets certain conditions: they can claim overseas workday relief (this replaces the requirement in SP1/09 that they are Resident and Not Ordinarily Resident); they have general earnings from one or more employments which are subject to sections 15 and 26 ITEPA (‘mixed employment income’); they nominate an account for use as a mixed fund to which the special mixed fund rules will apply; and
CIPP Policy News Journal
12/04/2013, Page 33 of 362
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