Taxation

Non-Domicile Legislation A Recipe For Non-Compliance

Treasury proposals for taxing ‘non-domiciled’ individuals working in the UK will affect significant numbers of low-paid migrant workers, many of whom will be unable to cope with the compliance requirements, says The Institute of Chartered Accountants of Scotland (ICAS).

ICAS recommends in its submission to the Treasury consultation on residence and domicile legislation that the introduction of the new laws are deferred until April 2009 to allow time for advisers and taxpayers to be able to understand and comply with the new rules. Allowing this additional time before implementation would ensure that the drafting will produce legislation that is clear and which will work as intended.

The effect of the legislation means that individuals with overseas income of more than £1,000 will have to file UK Self-Assessment Tax Returns to disclose that income and deal with any potential ‘double’ taxation. Failure to do so will mean that such individuals will be non-compliant in respect of their UK tax obligations.

ICAS Director of Taxation, Derek Allen, said, “It is unlikely that low-paid migrant workers will have money to spend on tax advisers. When you add in the difficulty of coping with our complex tax rules which are already confusing to a native speaker of English, it is potentially a big problem. Time will also be required for HMRC staff to be trained to deal with this group of the population.”

Derek Allen continued, “It would be more sensible to raise the £1,000 limit for unremitted overseas income to a more reasonable figure to take these individuals out of UK tax in respect of overseas income. We recommend that a level of £5,000, approximating to the personal allowance, would be fairer. We do not think that it is reasonable to require that individuals with small levels of unremitted overseas income should lose their UK personal allowance. This will impact on low paid migrant workers against whom the policy does not appear to be directed, and amongst whom the risk of non-compliance is highest.”