The government should delay the introduction of the non-domicile reforms until 2018, so they can be carefully considered and fixed for the long-term, chartered accountants Blick Rothenberg have argued.
Last summer’s Budget saw then-chancellor George Osborne announce plans to change the tax regime for people who have a foreign domicile.
Late last week, HM Treasury stated these changes would bring an end to permanent non-dom status for tax purposes, as it published a consultation on how they could be prevented from sheltering UK residential property from inheritance tax.
This will involve abolishing the practice known as “enveloping”, where individuals hold UK residential properties through an overseas company or similar vehicle.
Nimesh Shah, partner at Blick Rothenberg, said it was an unusual move to begin another round of consultation, after an initial nine months of reviewing policy, especially since there has been no delay to the effective date of the rules coming into force of 5 April 2017.
“The original announcement was made over a year ago so the government has had ample time to get the rules in order, and to leave such an important measure on the backburner for such a length of time is disappointing,” he stated.
The new consultation will run until 20 October, and while the latest announcements are largely expected to be the final form of the rules, there are important points of detail to iron out, argued Mr Shah.
“The government should delay the introduction until 2018, so that this final consultation can be carefully considered as it is important the rules are fixed for the long-term, especially after the almost annual tinkering to the rules since the last major reforms in 2008.”
The latest version of the rules will effectively bring all UK residential property within the scope of IHT, irrespective of how the property is owned (for example through a company).
Mr Shah said it was disappointing that the government had not taken forward a relief, or some form of relaxation, when extracting properties from companies.
“The motive behind recent measures has been transparent ownership of residential property, and to not offer any kind of transitional rules goes against previous suggestions. Our expectation is that it was simply too difficult to offer a workable relief and so this has been shelved.”
However, in more positive news, the consultation has offered some encouragement to non-domiciled individuals to remit monies to the UK, which Mr Shah said will be helpful for inward cash flow into the UK economy.
“Overall, the consultation response was largely as expected but more time should have been offered to what has become a key component of the UK’s tax policy, especially given the EU referendum result.”
peter.walker@ft.com
