CIOT calls for deferral of changes to CGT for non-domiciles
The Chartered Institute of Taxation (CIOT) calls for Capital Gains Tax (CGT) changes for trusts and companies set up by UK resident non-domiciliaries (“non-doms”) to be deferred until a proper assessment can be made of the impact on the UK economy.
John Barnett, CIOT spokesman, says: “As well as introducing a £30k p.a. charge for non-doms, the pre-Budget report (PBR) proposals also made vague reference to extending certain anti-avoidance provisions which do not currently affect non-doms. Although it is not entirely clear, we understand that under this heading the government may be contemplating changing the CGT treatment of offshore trusts and companies set up by non-doms.
“While it may be tempting to seek to raise additional tax from non-doms in this way, it needs to be recognised that the non-dom population are, by definition, highly internationally mobile and in many cases can choose to invest in foreign rather than UK businesses and assets.”
The CIOT are concerned that if there are changes of the type mooted, there will be no additional tax raised.
John Barnett adds: “There is a significant danger that non-doms will move their investments out of the UK and potentially even relocate altogether. The loss to the UK economy as a whole might be substantial. The City of London could be particularly affected as could other specific sectors such as the international art market (which could easily relocate to New York or elsewhere).
The CIOT believes that potential changes of this sort are of an entirely different magnitude to the £30k proposals and should not be enacted without a careful study of the economic effects. The CIOT hope that, if the suggestions as to the direction of change are indeed correct, implementation of any proposals is deferred until, say, April 2009 to allow for proper study and consultation. This would coincide with other aspects of the proposed changes which are already set to be delayed until that date.
The CIOT espouses the principles of fairness, competitiveness, simplicity and certainty in the tax system. These principles apply as much to non-doms as to other areas of the tax system. While there is sometimes a balance to be struck between these principles, we fear that the change which may be being contemplated would produce a ‘worst of all worlds’ rather than a well-chosen compromise.
We have already raised these concerns with the government in more detail, and intend to provide further details of the difficulties surrounding change in this area in response to the government’s promised consultation.
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For press information contact Simon Goldie on 020 7245 4122 (direct line), 07879 497316 (mobile). Email sgoldie@ciot.org.uk
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