Non-dom move not a game-changer - PwC

Friday 10 April 2015

The prospect of the UK changing the rules on “non-dom” residents who don’t pay tax on overseas earnings would not be a game-changer for Jersey, according to one tax expert.

Labour leader Ed Miliband announced a plan to crack down on non-doms this week, but PwC Tax Partner Wendy Dorman says that – while details appear thin – the proposals do not look likely to have a major impact.

She said: “Whilst we have very little detail at this point, the announcement doesn't appear to suggest a complete abolition of the non-domiciled status, but rather aims to introduce a deemed domicile status for all UK taxes. The UK currently only has a deemed domiciled status for inheritance tax which applies after an individual has been resident for at least 17 of the last 20 tax years. There is no equivalent for income tax or capital gains tax.

“From the comments, it appears that individuals would become deemed domiciled in the UK for all taxes in a much shorter time-frame, possibly five years or less. It would not then be possible to claim the remittance basis and individuals would, in all likelihood, then be required to pay tax in the UK on their worldwide income and capital gains. Relief may still be available where tax has already been paid on such income and gains in another jurisdiction.

“The Channel Islands would undoubtedly be impacted if the non-dom status was scrapped, as many non-doms hold their non-UK wealth through Channel Islands trust and company structures.  However there are many other reasons for using the Channel Islands, and the financial services industry is sufficiently diverse both geographically and in terms of products and customer base, that success is not dependent on this one source of business.”