This chapter has been updated for the 2018/19 edition
Scope of this book
There are three themes to this book:
(1) Taxation of foreign domiciliaries
(2) Taxation of non-residents on UK assets
(3) Taxation of UK residents on foreign assets
To attempt to cover these topics comprehensively is ambitious, perhaps quixotic. This book is in danger of bursting, particularly because these territorial issues can only sensibly be discussed in a wider context. But one cannot address the first topic without the second and third: in taxation, as in life, everything is connected. Thus what started as a book on foreign domiciliaries has become a book which seeks to address all the territorial limits to UK taxation.
The year 2017/18 in review
OTS stated in 2017:
- The UK tax code is widely cited as being the longest in the world”.
FA 2011: 403 pages FA 2012: 703 pages (a record) FA 2013: 648 pages FA 2014: 663 pages FAs 2015: 562 pages FA 2016: 649 pages FA 2017: 813 (a new record) FA 2018: 187 pages
In the same period, OTS has not achieved perceptible improvement, at least in relation to the topics covered in this book. 
It is easier to talk of simplification:
- Our system remains too complicated ... We will therefore simplify the tax system. 
The reader may think that the satirists better identify the reality:
- We will further complicate the UK tax system so that large companies can no longer find loopholes. 
Scotland continues its fiscal drift from the UK, with Northern Ireland and Wales now following.
The FA 2018 has introduced the second stage of the protected-trust regime, which is a revolution in the taxation of offshore trusts. It also provides legislative authority for implementing the BEPS multilateral convention.
The courts have decided many interesting cases, including Barclays Wealth v HMRC, Barker v Baxendale Walker Solicitors; R (oao) Hely-Hutchinson) v HMRC.
OECD has published the 2017 update to the Model Tax Convention,
OECD has produced the BEPS convention, noting, I think correctly:
- International tax issues have never been as high on the political agenda as they are today.
The growth in complexity is matched by a decline in HMRC efficiency. A contribution to the Trusts Discussion Forum provides:
- I’m now at the point where I diarise my chasing letters and complaints ahead of time, and have template letters for this purpose. Initial letter, a chasing letter a month later, a second chasing letter a month after that, and a formal complaint a month after that. It is not unusual for me to have half a dozen open complaints against HMRC at any given time, but whatever it is I was complaining about is generally sorted within 30 days of the complaint letter. In one case I was even able to get them to pay our costs for chasing them.
- Even three years ago I could not have imagined having to take this approach to HMRC, and I can only speculate as to how demoralising it is for the remaining staff.
The government intends to introduce:
(1) CGT on non-residents gains from disposals of UK property. This is to take effect in 2019/20.
(2) Corporation tax on non-UK resident companies' UK property income and gains. This is to take effect in 2020/21.
Both changes It will add to complexity. CT is a more sophisticated tax than IT, in many respects, in particular the taxation of interest (loan relationships) and hybrids. Private client practitioners advising foreign companies will have to master CT rules which hitherto they could leave for corporate tax practitioners.
The government has yet to map out a strategy and tactics for unravelling the UK’s connections with the EU. In the 2017/18 edition of this work I said: "This is a daunting task, and will take a generation if not more". One year on, we are no further ahead.
We face an extended period of change and uncertainty, in politics, economics, law and taxation.
We will continue to live in fiscally exciting times.
Thanks ...and request for help
I am very grateful to my colleagues in chambers, especially Robert Venables QC and Philip Simpson QC, for discussions on many aspects of tax. I owe a great debt to Jane Hunt and Ruth Shaw who work patiently on this challenging text throughout the year.
Comments from readers and professional clients continue to be of the greatest value and interest to the author.
The pleasure in writing this book consists in the interest of the questions which it raises, and the success which it may have achieved in answering them. It seeks to state the law as at 6 April 2018.
If you want advice on which you are legally entitled to rely you can obtain it - but not from this work.
In particular, you may instruct the author to advise. I enjoy writing, but spend most of my time giving independent specialist professional advice in private client matters, especially areas covered in this work. For further details see http://www.kessler.co.uk.
TFD Online is an online version of this book and more. It can be used:
(1) to search the text of this book or to access it online.
(2) to see if the book has been updated
(3) to correct or contribute to the book
TFD Online is moderated by Mary Ashley, a member of Tax Chambers, 15 Old Square, Lincoln's Inn.
TFD Online is accessible on http://www.foreigndomiciliaries.co.uk. An authorisation code for a 3 week trial period is in the inside cover of this volume.
CIOT issue professional guidance with a disclaimer:
- While every care has been taken in the preparation of this guidance the PCRT Bodies do not undertake a duty of care or otherwise (?) for any loss or damage occasioned by reliance on this guidance. Practical guidance cannot and should no be taken to substitute appropriate legal advice.
When that appeared in 2011 it seemed extraordinary. But it rapidly became ubiquitous; nowadays no professional body ever issues guidance without a disclaimer Similarly, and a fortiori, the views expressed in this book are put forward for consideration only and are not to be relied upon. Neither the author nor the publisher accept responsibility for any loss to any person arising as a result of any action or omission in reliance of this work. But could anyone have thought that a claim could arise in absence of this disclaimer?
A note to the lay reader
This book is not intended as a self-help guide, and is addressed to tax practitioners. In earlier editions I said: " ... but it is readable for a lay person". I think that is still true, though the text is more daunting than when I first wrote those words, because the law it describes has become much more complicated. However, initiation in these matters must often be by the taxpayer. If you wish to research this subject in depth, and so take more control of your own tax affairs, read on. But for implementation you will need to find professionals to advise you. Self-help guides extol "the benefit of bypassing expensive lawyers"; but the bypass may prove the more expensive route in the long run.
|1st 2001||5th 2006||9th 2010||13th 2014|
|2nd 2003||6th 2007||10th 2011||14th 2015|
|3rd 2004||7th 2008||11th 2012||15th 2016|
|4th 2005||8th 2009||12th 2013||16th 2017|
This book was called Taxation of Foreign Domiciliaries for 9 editions; it changed to Taxation of Non-Residents and Foreign Domiciliaries in the 10th edition.
- James Kessler QC
- Old Square Tax Chambers
- 15 Old Square
- Lincoln's Inn
- WC2A 3UE
- It is hard to empirically assess the claim that the UK has the longest tax code in the world, and OTS makes no attempt to do so. But if any readers ae aware of other serious contenders for that title, I would be interested to hear.
- For the older references see the Introduction to the 15th (2016/17) of this work.
- Finance Act page counts are a rough proxy for the ever growing complexity of the UK tax system, but not an altogether bad one. A (slightly) better proxy would also consider secondary legislation and HMRC guidance; and, perhaps, case law; then the page counts would multiply the Finance Act numbers set out here tenfold.
For a discussion of the multidimensional concept of tax complexity, see Tran-Nam and Evans, “Towards the Development of a Tax System Complexity Index” (2014) Fiscal Studies Vol 35 p.341.
OTS have published two (somewhat simplistic) discussions of tax complexity:
Length of Tax Legislation as a Measure of Complexity (Apr 2012)
- This is the combined length of the two FAs 2017.
- See eg IFS, “OTS: Looking Back and Looking Forward” TLRC Discussion Paper No. 11 (2014) tactfully referring to “insufficient buy-in to the simplification process by HMRC, HM Treasury and government”. But this view is not held by OTS: see Sherwood, Evans and Tran-Nam “The Office of Tax Simplification - The Way Forward?”  BTR 249.
- Conservative party manifesto 2017 p.14
- Official Monster Raving Loony Party Manifesto 2017
- 6 October 2017 under thread “HMRC delays”.
- HMRC, “Taxing gains made by non-residents on UK immovable property: Consultation document” (Nov 2017)
- https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/661 467/Taxing_gains_made_by_non-residents_on_UK_immovable_property_-_cons ultation.pdf
- See HMRC “Non-resident companies chargeable to Income Tax and non-resident CGT: Consultation Document” (Mar 2017)
- https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/601 032/Non-resident_companies_chargeable_to_Income_Tax_and_non-resident_CG T_-_consultation.pdf
- https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/664 178/Non-resident_companies_chargeable_to_income_tax_and_non-resident_CG T_summary_of_responses.pdf
- CIOT, Professional Conduct in Relation to Taxation (2015), para 1.10 http://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation The second sentence is an improvement on the common but rather bizarre form that guidance on legal issues “does not constitute legal advice”.
- For instance, the Law Society likewise issue a disclaimer for their Practice Notes: The standard form is: “While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.”