New guidance on the tax rules for non-UK domiciled individuals is potentially dangerous, according to tax experts in Birmingham.
With just days to spare, HM Revenue & Customs (HMRC) finally produced the long-promised detailed guidance on the rules that will affect non-UK domiciled individuals on Monday.
And at well over 400 pages in total, PKF Accountants & Business Advisers is warning affected taxpayers to take great care in using it.
Sarah Moss, a director at PKF in Birmingham, said: “As far as individual taxpayers are concerned this guidance is too much and too late – as well as being potentially misleading, or incorrect in some circumstances.
“The guidance confirms that many individuals, who had not previously had to worry about their tax status because they only have modest funds overseas, will now have to consider their position very carefully. Many may take one look at the guidance and feel obliged to submit a tax return unnecessarily, seek professional tax advice over these complex rules or, regrettably, decide to ignore the issue completely.”
HMRC’s new 85 page booklet HMRC 6 replaces booklet IR20 – its long established guidance on residence and domicile issues for self-assessment taxpayers. Although the new guidance is more detailed, tax advisers take issue with some of the statements made.
Ms Moss said: “Some paragraphs of the guidance seem to introduce new elements to the rules established through case law – at the very least this could lead unrepresented taxpayers down the wrong path.
“The flowcharts aimed at helping individuals self-assess their domicile status could be dangerous. Unless you are already an expert in this area, using them could produce an incorrect answer and taxpayers should not use them in isolation to determine their tax status.
“In other parts of the guidance, the tone of HMRC’s commentary could be perceived by taxpayers as threatening. If individuals are deterred from making a claim, they could end up paying more tax than they are legally required to.”
HMRC’s new internal manual on the remittance basis runs to 274 pages of guidance, but still envisages that its officers will get help from its Offshore Personal Tax Technical Group.
Although there are some relaxations, other concessions, on when a tax return is or is not required, could lead to taxpayers in the same circumstances not being treated equally.
Sarah Moss added: “These rules are clearly too complex. It is a pity that what started out as a simple concept to charge UK-resident non-domiciled individuals a fee for maintaining the benefits of their tax status has produced over 100 pages of legislation, more than double that in guidance notes, and caused uncertainty for over 18 months.
“I am sure that we can regard this guidance as ‘a work in progress’ – soon to be updated to give a clearer position. But even then, it will still be very difficult for individuals to self-assess their tax liabilities correctly, based on these complicated rules.”
More than one in four “non-doms” intended to emigrate in the next two years because of the government’s tax changes, a recent survey by KPMG found. And they said the loss of the foreign taxpayers could cost the UK up to £270m in lost assets.
The changes introduced last year included a £30,000 charge for people who have lived in the UK for more than seven years but do not pay UK tax on their income and gains because of their non-dom status.