Accountancy Age has reported that John Whiting of PWC has said of the proposed changes to the domicile rule that:
There is a serious concern that what we are getting is just stage one. The suspicion is that the levy will go up in time and that the rules will become tougher
John and I know each other and have spoken at a number of events together over the last year. He even suggested in December that he was getting used to being my warn up act.
It's also good to note that he seems to be both listening to and believing what I say: the domicile rule will go.
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Although the headlines all focus on the super rich and the non doms in the City, the real targets are quite different.
Something that seems to be missed by many in this debate is that the £30,000 bung is NOT really an option for anyone but the super-rich.
In my view the vast majority of non doms who currently claim the benefits of the remittance basis will choose NOT to do so after 5 April 2008.
In my view, the REAL reason for the new rules is to encourage the 2nd and 3rd generation non doms around the country to disclose their worldwide income and gains. Where these are already taxed overseas the additional UK tax payable thereon will often be significantly less than £30,000 – whihc is why they won’t want to pay the bung.
[£30,000 equates to 10% extra tax on £300,000 of income and gains]
Anyone who is disinclined to reveal their worldwide income and gains and instead to claim the remittance basis will lose the benefit of their personal allowance and their CGT annual exemption. They will also need to understand the new rules for identifying taxable remittances. This will be the real killer as few tax specialists, let alone general practitioners will be sufficiently expert to follow the new rules and able to explain them in a way that clients can understand.
The new remittance basis rules are already extraordinarily complex. Few people will want to have to try to understand them. I’m sure that’s deliberate.
You have hit the nail on the head. The proposals are quite clever at one level in that we move away from debating whether a person is domiciled in the UK (a subjective test so not one HMRC can hope to win against a living person with a domicile of origin outside the UK) to the objective criteria of “do you want to claim the remittance basis. If so that is 30,000 pounds please”. This will as you correctly note flush out vast numbers of non-doms at the lower/medium end of the spectrum into paying tax in the arising basis and enable HMRC to target its meagre resources far more effectively. What is disappointing is this deep fiasco of a process which has meant the government are now stuck in a terrible rut of its own making and even today are making concessions left, right and centre! Why on earth did they not take a cautious, sensible approach, implement this reform properly and then take the credit instead of looking even more stupid and incompetent than before?