The government has announced new consultations on the above subjects to day.
I'd suggest they read this, which I wrote for the TUC.
I've not had reason to change my mind on the subject since last year.
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A pre-requiste of your passport-based proposal is the viability of the UK obtaining a definitive list of all individuals entitled to a UK passport (assuming your proposal relates to eligibility for a passport, rather than actually having one).
How does the UK get and keep such a list of the (millions?) of Commonwealth citizens eligible for a full UK passport by descent? The UK doesn’t know who they all are or where they all live across the world, and has no legal jurisdiction to even ask.
Your proposal would require Julia Gillard to pay UK tax if she moved to Monaco. Or if she stayed home and Australia for some reason ceased to be a comparable tax country. I don’t see her filing any sort of UK return in either circumstance.
You haven’t read it, have you?
Nothing to do with this thread, but interesting:
“Josiah Stamp had all this nailed a long time ago:
“Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again.
However, take it away from them, and all the great fortunes like mine will disappear, and they ought to disappear, for this would be a happier and better world to live in. But if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits.” ”
http://sodiumhaze.blogspot.com/
Very interesting paper Richard – and relevant to PSG members who are all Spanish tax residents
This requires us to provide the Spanish tax authority (the Hacienda) with an annual tax return — as well as a list of ALL world-wide-wealth for Spanish “wealth tax” — together with (in theory) jewellery and anything else of value.
Including of course the contents of any “off-shore bank accounts” which the Hacienda hate with a vengeance.
Although the “wealth tax” is very low it serves to inform the Hacienda of your real worth so when you die it can hit the beneficiaries with a much larger death duty.
But just because you live in Spain as a “tax resident” does not mean that you have lost your UK domicility and a person could still be liable to some UK taxes. To be considered “non-domiciled” requires (as you have written) to not visit the UK for more than 91 days a year (on average for three consecutive years). And it also requires a person to break other ties with the UK; including not having a UK bank account, not being in any UK clubs and associations and generally breaking all bonds with Britain.
Even then one can never be certain that the HMRC have accepted a UK national as becoming non-domiciled.
And the HMRC does check “movements” via various means including flight and ferry tickets. One PSG member arranged with the HMRC to receive his UK pension gross, paying the tax in Spain; some time later the HMRC unexpectedly contacted him to say that they were instructing his pension provider to commence deducting UK tax because their “records” indicated that he was spending more than 91 days in the UK.
The HMRC were later proved wrong — and re-instated the payments, gross
But they do watch us. Believe it!
Section 4: – long term ties
You say that to be a resident under this heading you must actually have a passport. You use the word ‘have’ repeatedly so I can only assume you really do mean the passport must physically be held to trigger residence under this section. Admittedly, I incorrectly assumed you were referring to eligibility to a passport but on a closer re-read, it seems you are saying that to be a resident under this section, you must actually have the passport.
If actually holding a passport is the requirement to be a resident under this heading:
1) Where does that leave the 20%-odd British people who live here but who don’t actually have a passport at any point in time? I assume they are caught in section 5 under the rules applicable to individuals without long term ties on the grounds they are likely to be present in the country for the relevant number of days.
2) This requirement would be pretty easy to get around for emigrants. Emigrate, take out a 2nd citizenship, let your British passport expire, and then relocate to the non-white list country under your other passport. If you later want to come back to the UK to live, you just apply for another passport then.
Your solution would seem to catch Commonwealth citizens who actually have a UK passport (admittedly fewer than those simply eligible). Remember, their passport is just the same as yours — allowing them to come and go as they please, use the NHS, vote and run for Parliament. Under your proposal, they would be caught as UK tax residents if
1) They lived in a non-white list country from time to time.
2) The UK decided in future to treat their home country as a non-white list country due to tax changes in their home country.
The mind of the tax avoider at work
I make no pretence my system is perfect – or that in a short document I covered all angles
Of course anti-avoidance rules would be necessary
But to address simple points: those living here without a passport are de facto resident – so no issue
Those from Commonwealth countries are now relatively limited in number – and they can come anyway if elegible! And yes they’d be caught – and may have to decide where they do really want their passport from.
“The mind of the tax avoider at work”.
Not really. If holidng a passport is a requirement for tax residency, it doesn’t exactly require super levels of cunning to see that loophole. Gaping.
“Of course anti-avoidance rules would be necessary”.
I thought your proposal was supposed to be the anti-tax avoidance provision — keeping the Monaco boys in check and all…. If a proposed anti-tax avoidance provision needs the backing of more anti-tax avoidance rules, it doesn’t speak volumes for the original proposal, does it?
Second, a court in a non-white list country is very unlikely to recognise these residency rules on jurisdiction grounds (that’s why they are non-white list countries — they aren’t exactly HMRC’s best mates). So why would a court in such a country give 2 hoots about an anti-avoidance provision sitting in a UK statute?
“I make no pretence my system is perfect”
I’m afraid that’s not the impression you gave in your post. You give the impression you have no reason to change your mind about it.
In the interests of transparency, can you kindly disclose what you were paid by the TUC for this report?
“and may have to decide where they do really want their passport from”.
Are you suggesting the UK strips its diaspora of of their citizenship? That’s a can of worms that I can’t see being opened to satisfy HMRC. History, empire, commonwealth, international relations and all that. Plus I just can’t see the UK going down the road of stripping anybody of citizenship – heck, the UK doesn’t even strip the citizenship rights of murderers in jail for life!
We have changed rules on citizenship – often
Don’t put up absurd arguments
But the point is – we don’t need to do so – for the vast majority the White List concept will work perfectly well – as HM Treasury know, by the way
“We have changed rules on citizenship — often”
Not retrospectively, at least as far as I am aware.
Browsing through Murphy’s archives, it appears that the idea of the passport rule has been discussed several times before (http://www.taxresearch.org.uk/Blog/2010/05/09/time-for-a-passport-tax/, http://www.taxresearch.org.uk/Blog/2010/10/18/tuc-says-its-time-to-change-the-uks-residence-and-domicile-rules/). THis is old news.
Those who say that the passport rule would be impossible to implement completely miss the point. All Americans living overseas have learnt to live with it. The IRS office in London apparently processes in excess of a quarter million tax returns every year. Americans bitch and moan it but by an large understand that it is the price to pay for the privilege of being American. (whether it is an equal privilege to be British is another debate…).
Where Murphy gets it wrong is around the amounts of revenue that this rule could generate. How he comes with a figure of 1 billion is a complete mystery. Murphy admits in some of these earlier threads that he basically plucked the number from thin air.
The amounts he hopes to raise from reforming the domicile regime are, truly, absurd. There are 5,000 non-doms (out of a total of 100,000) paying the remittance basis charge, and so Murphy hopes that these 5,000 people agree to pay 3 billion in total or 600,000 per head. Total fantasy.
You ignore evasion
There are up to 7 million non-doms in the UK
7 million? Surely that’s a typo?
No, read the paper
Richard
I have indeed read the paper.
I have noted the assumptions upon which you base your estimate of up to 7 million potential non-doms currently living in the UK but those projections are extremely subjective.
Domicile is very much a state of mind – “do I have the intention to settle permanently in the UK?”.
A great many of those 7 million potential non-doms clearly do consider themselves to have permanently settled in the UK. Moreover, they have not retained sufficient links to their home country to argue to HMRC that they have retained their domicile of origin. In many cases it is clear that their fathers had already shed their domicile of origin by the time that the child was born, and so the child would not have inherited the father’s foreign domicile of origin at birth. Without really wanting to single out any particular ethnic groups, how many descendants of West Indian immigrants from the 1950s and 1960s ever intend to return to Jamaica and Trinidad, for example? What about the huge number of immigrants from Nigeria, Ghana and Sierra Leone living in South London who are now 2nd, 3rd or even 4th generation immigrants? Do they have any intention at all to return there? I strongly suspect not.
I act for many wealthy non-doms and there is no doubt that they are at a huge advantage. Firstly, if they come with existing wealth then they tend to take appropriate tax advice and therefore they know all about the benefits of claiming foreign domicile and what they need to do to maintain it. Secondly, they can afford to go back home as a family on a regular basis and maintain their links with their home country, keeping property there, sponsoring the local village school etc. The groups to which I refer above realistically cannot afford to do that even if they really wanted to.
I really don’t know whether your initial 7 million figure is correct or not. It may be or it may not be, but I strongly suspect that up to 90% of that figure probably now regard the UK as their permanent home and so really aren’t non-domiciled if it was tested (which of course it won’t be as there won’t be any material tax at stake). Of the remainder, quite a large number may well be non-domiciled in terms of their state of mind, but cannot afford to do what’s necessary to evidence it, and many others may well have the long-term intention to return home but their finances are such that its actually irrelevant whether they are non-domiciled or not because no tax is at stake.