HMRC attacks fake non-domiciled status
The favourable tax rules that apply to people able to claim UK non-domicile status have long caused controversy, and a government review of the rules that started in 2002 remains ‘ongoing’. The number of people claiming not to regard the UK as their permanent home has increased significantly since 2002. Most recently, new claims of non-domiciled status are being made as a response to HM Revenue & Customs’ (HMRC) clampdown on tax evasion on offshore accounts.
Amid some suspicion that the rules are being abused, HMRC has added some new questions to individuals’ tax returns. Anyone who claims non-domicile status must now state specifically whether their domicile affects their income or capital gains tax liability. There are further questions designed to identify long-term UK residents, and people born in the UK but claiming non-domicile status based on their father’s origin. Anyone who previously had UK domicile status must give the date their domicile changed.
Based on the information, HMRC will no doubt open enquiries. But it is notoriously difficult to prove that someone with a non-UK domicile of origin – normally the father’s domicile when that person was born – intends to remain indefinitely in the UK, especially if the individual enjoys good professional advice.