New UK Non-Dom Scheme Welcomed

By Editorial 18 April, 2012

The UK's new 'non-dom' legislation provides potentially attractive relief, but investors must be aware of the complex rules, lawyers have warned.

The legislation, which came into effect on April 6, has been given a cautious welcome by law firm Boodle Hatfield. The rules mean that individuals domiciled outside the UK are now able to make unlimited investments into commercial businesses without incurring income or capital gains tax liabilities on the funds used for the purpose. Individuals resident, but not domiciled in the UK, who opt into the remittance taxation basis and pay the relevant charge, will be able to take advantage of this relief.

Boodle Hatfield believes that, with the take-up of the remittance system "disappointingly low", the relief may now encourage some of the wealthiest resident non-domiciles to pay the charge whilst helping UK businesses. Geoffrey Todd, a partner in the Private Client and Tax team said: “This is potentially an attractive and valuable relief for non-doms and a welcome source of additional potential investment for UK businesses. Resident non-domiciles may find it particularly helpful that the rules will allow them to invest into companies that they themselves own or work in, subject to various anti-avoidance rules, and in a wide range of trading businesses, including those involved in commercial property.”

However, Todd added that investors must be aware of the limitations imposed. “Investments cannot be made into partnerships and PLCs listed on the London Stock Exchange, although investments on the AIM and PLUS exchanges are permitted. Nor can investment be made into a residential property company whose primary business is lettings... If the investment is cashed in and the funds are not withdrawn from the UK or reinvested within 45 days, a remittance of the original foreign income and gains used to fund the purchase will be deemed to be made at that point.”

Todd did however conclude that: “Generally, this relief is welcomed and will best suit wealthy well advised non-dom investors who intend to take a keen interest in the companies in which they invest."

Tags: Individuals | Expatriates | Capital Gains Tax (CGT) | Tax | Investment | Business | Law | United Kingdom | Offshore | Legislation | Individual Income Tax |


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