Regulation  

Dispute breaks out over non-dom double taxation

For example, Mr Davies suggested the capital gain on a carried interest held by a family trust offshore and distributed to a UK resident family member could be taxable on that family member and also on private equity non-dom.

This is because there is only relief for double taxation where the private equity non-dom pays tax on the same carried interest twice, for example if there was a carried interest gain assessable on him individually and he subsequently received a distribution from the trust.

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Roger Harding, tax director at Gordon Dadds, agreed that on the face of it, it is easy to conclude there is potential to tax the same gain twice - on receipt by the individual and then to the extent capital payments are made to the UK beneficiary - which can be matched with this gain.

“Perhaps this is an unintended consequence, as the legislation is seeking to ensure tax is paid on the true economic gains enjoyed by individuals affected by the new rules.

“Further clarification is needed in this area and this is yet another example of rushed legislation with far reaching consequences that have obviously not been thought through properly.”

However, a HMRC spokesperson said while they could not comment on individual tax arrangements, the legislation includes an express provision to prevent a double tax charge. This allows for relief when the same income or gain would otherwise be taxed more than once.

“We want fund managers to pay UK tax on the full economic gains made on carried interest payments when the funds are managed in the UK.”

emma.hughes@ft.com