STEP responds to HMRC consultation on the Statutory Residence Test and Non-Dom rules

The Society of Trust and Estate Practitioners (STEP) recently responded to the HMRC consultation documents proposing reform of the taxation of non-domiciled individuals and the statutory definition of tax residence.

Statutory Residence Test

STEP has long been of the opinion that the current uncertainty surrounding tax residence in the UK is unsatisfactory. It acts as a disincentive to those considering coming to the UK whether for business, work, pleasure or with a view to investing here. The uncertainty of the current rules also makes it difficult to advise many of those exiting the UK when they have become non-UK resident for tax purposes. STEP advocates a pure day count test and notes that the consultation document gives no reasons for not adopting this approach.

Wendy Walton, chairman of STEP’s UK Technical Committee, said: “A statutory residence test is capable of being a simple and objective test such as those widely used by other countries. While STEP would have preferred the simplicity of a day count test the proposed changes should give clients much needed certainty and improve our international competitiveness.”

Non-Domiciled Rules

STEP believes that the rules should be easy to comply with and should not necessitate extremely onerous accounting mechanisms to be put into place in order to comply. In relation to the remittance rules contained in FA 2008, we consider that the way in which the remittance rules currently operate acts as a disincentive to investment in the UK and we are glad that the Government has now recognised this.

Regarding the non-domiciled rule proposals Wendy Walton said: “We welcome the proposals set out in the consultation document in principle, but feel that they do not go as far as is required to reduce the complexity of the rules or to stop non-domiciliaries from feeling unwelcome, and driving those who are already here away.”

For the full response to each consultation, please see:

Reform of the taxation of non-domiciled individuals: a consultation issued by HMT/HMRC in June 2011 (PDF File)

Statutory definition of tax residence: a consultation HMT/HMRC consultation document issued on 17 June 2011 (PDF File)