Increased remittance basis charges
It is likely that the remittance basis charge will increase. There are two main reasons for this. First, the Conservative manifesto promised increased charges – it stated:
“We will increase the annual tax charges paid by those with non-domiciled status, ensuring that they make a fair contribution to reducing the deficit, and continue to tackle abuses of this status”
Secondly, it seems likely that the Conservatives will want to dampen what has become a hot political issue (even a leader article in the Financial Times earlier this year advocated the abolition of non-dom taxation) and (ii) try to demonstrate their one nation conservatism.
It should be noted that earlier this year the Conservatives have already:
- increased the remittance basis charges 2015/2016, so that a person who has been tax resident for 17 of the past 20 tax years must pay £90,000 pa, a person who has been tax resident for 12 of the past 14 tax years must pay £60,000 pa and a person who has been tax resident for 7 of the past 9 tax years must pay £30,000 pa; and
- launched a Consultation to consider whether to continue to allow a non-dom to elect for remittance basis taxation on a year by year basis or whether the election should be made for a minimum period of, say, 3 tax years.
It is impossible to predict what increases might be introduced. Interestingly, the Liberal Democrats proposed higher remittance basis charges of £150,000 for those who have been tax resident in the UK for 17 of the past 20 tax years; £100,000 for those who have been tax resident in the UK for 12 of the past 14 years; and £50,000 for those who have been tax resident in the UK for 7 of the past 9 years.
Other changes to non-dom taxation
It is likely that there will be other changes. In the run-up to the General Election the Conservatives indicated that they would continue to tackle abuses of non-dom status and they referred to possibly withdrawing non-dom tax privileges for those who were born here and have inherited their non-dom status. In this event, potentially, non-dom taxation would be available only to those who had moved to the UK as an adult.
Similarly, it has been questioned whether a UK passport-holder should be able to enjoy non-dom taxation and whether non-dom taxation should cease to be available after a fixed number of years of tax residence.
Labour’s mansion tax on £2m+ residential properties will not happen. It is possible that instead there will be a re-rating of properties for Council Tax purposes although this may be delayed to enable the full impact of other recent tax changes (The Annual Tax on Enveloped Dwellings, Stamp Duly Land Tax and Capital Gains Tax on residential property for non-UK residents) to be assessed.
The Inheritance Tax nil-rate band
The Conservative have promised that from April 2017, parents will each be offered a further £175,000 “family home allowance” to enable them to pass property on to children tax-free after their death. This allowance, when added to the existing £325,000 Inheritance Tax nil-rate band would increase the total transferable tax-free allowance from both parents to £1m. Furthermore, the increased amount would be transferable even if one spouse had died before the new allowance comes into effect, so that it would benefit existing widows and widowers. However, for properties worth more than £2m, the new allowance would be gradually reduced so that those with homes worth more than £2.35m would not benefit at all.
UK res non-doms should review their position and plan for possible changes. The Conservative government will deliver its first Budget on 8 July 2015.
Those who are have held off coming to live in the UK pending the outcome of the General Election can now reconsider their plans on the basis that non-dom taxation is likely to continue at least for the next five years if not beyond that.
If you have not already considered how the changes could affect you then we would recommend that you please speak either to your usual Saffron adviser or to Nicholas Hughes.