Possible changes to CGT – Update on the latest OTS review
The Office of Tax Simplification (‘OTS’) has published the first stage of its highly anticipated review of Capital Gains Tax (‘CGT’)...
Cleansing relief for non dom mixed funds. What’s not to like? Quite a bit actually
Let’s Talk TaxFinance Bill 2017
Cleansing relief for non dom mixed funds. What’s not to like? Quite a bit actually
Cleansing relief for non dom mixed funds. What’s not to like? Quite a bit actually
Fri 15 Sep 2017
As most affected people will be aware there is a new relief proposed for anyone who has claimed the remittance basis in the past due to having a non UK domicile of origin and who becomes deemed domiciled in the UK from 6 April 2017. This will give them the opportunity in 2017-18 and 2018-19 to segregate mixed funds of capital, gains and income, into their different elements and to remit the capital element tax free to the UK. HMRC call this ‘cleansing relief’. In principle it can extend the period for which non doms can live tax free in the UK even if they are now deemed to be UK domiciled. What’s not to like?
Quite a bit. The Finance Bill provisions have some significant problems together with a cliff edge effect if you make a mistake in quantifying the different elements of the mixed fund. Let’s say you have a mixed fund of equal parts clean capital 100 and accumulated gains 100 but in the complex calculations to quantify these numbers you thought the split was 105:95. You then transfer the 105 to another offshore account and subsequently to the UK thinking it is clean capital. When you subsequently discover the error it is not 5 (the amount of your error) which will be treated as taxable but rather the 105 is treated as made up of equal parts clean capital and gains. So half -52.5 – will be treated as taxable.
Representations are being made to HMRC so there may yet be changes in the rules. In addition when the rules receive Royal Assent HMRC are to publish comprehensive guidance to the provisions. In view of all this best to wait until we have all the guidance we can reasonably expect before doing anything?
Lindsay Pentelow, Partner
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The UK Tax system continues to undermine UK Productivity
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Light at the end of the tunnel for non-UK domiciles?
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Remittance basis to be denied for some non-doms’ dual contracts
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Thanks for this advice Lindsay. When will the full guidance be available?