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'''''This chapter has been updated for the 2018/19 edition'''''
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To view this Introduction in pdf format, click here: [https://tfd.wiki.anarres.org/images/2/2b/FD_Introduction_%282%29.pdf  '''Introduction And What's New''']
  
 
==Scope of this book==
 
==Scope of this book==
  
There are three themes to this book:
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There are three original themes to this book:
  
(1)   Taxation of foreign domiciliaries
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(1) Taxation of foreign domiciliaries
  
(2)   Taxation of non-residents on UK assets
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(2) Taxation of non-residents on UK assets
  
(3)   Taxation of UK residents on foreign assets
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(3) Taxation of UK residents on foreign assets
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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.
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To attempt to cover these topics comprehensively is ambitious, perhaps quixotic, and if books could burst, this one might. But these territorial issues must be understood in a wider context: in taxation, as in life, everything is connected. So I discuss private client topics which go beyond the original themes of this book:
 +
 
 +
* substantial: fundamental terms and concepts, and tax avoidance codes
 +
 
 +
* procedural: disclosure/compliance, tax return filing positions, CDD, TRS
 +
 +
==A statute-focussed approach==
 +
 
 +
I set out statutory and other material verbatim:
 +
 
 +
:... in the end we must always return to the words of the statute<ref> ''R.F.C. 2012 Plc v AG'' [2017] UKSC 46 (the ''Ranger''s case) at [11]; see [[Settlement, Bare Trust, and Associated Terminology#A judicial gloss | A judicial gloss]]</ref>
 +
 
 +
Returning to the verbatim text, it is surprising how often one finds that the words do not say what one expects. 
 +
 +
This is not just a common law approach.  Richard Hyland tells this story of his class at Université Paris II Panthéon-Assas:<ref>Hyland. ''Gifts: A study in comparative law'', 1st ed (1989) p.xvi.</ref>
 +
 
 +
:Mme Gobert asked simply: ''L’article 2 du Code civil, qu’est-ce qu’il dit?'' Article 2 of the Civil Code, what does it say?
 +
:My classmates were some of the best private law students in France.  This was a question to which they knew the answer.  One of them explained that article 2 provides for the nonretroactivity of the law.  Mme Gobert looked at the student without smiling.  Then she repeated the question.  ''L’article 2 du Code civil, qu’est-ce qu’il dit?'' A different student mentioned Paul Roubier’s suggestion that a new law may be applied to ''les situations juridique en cours''.  Again she repeated the question.  ''L’article 2 du Code civil, qu’est-ce qu’il dit?''  Another student tried, and then another, each new voice attempting yet a more refined statement of the concepts involved. After each comment she responded in the same way.  It was my first French law class, so I did not know what to think.  It seemed like a Zen-like version of the Socratic method.  The French students were terrified.  This was material they thought they knew, and yet they could not guess what was on her mind.  Finally, one of the students had the presence of mind simply to read the code provision aloud.  Mme Gobert’s eyes lit up.  ''Mais bien sûr!'' she responded ''C’est ça qu’il dit!''
 +
 
 +
==The year 2023/24 in review, and the future==
 +
 
 +
HMRC have had an unbroken run of successes establishing a UK domicile.  ''Fisher'' finally reached Supreme Court, only to be promptly reversed by the F(no.2)A 2024. We have the first case on the statutory residence test, introduced in 2013 (''A Taxpayer v HMRC''), now on the way to the Court of Appeal, and the first on the remittance basis, introduced in 2008 (''Seghal v HMRC''). Scotland continues its fiscal drift from the UK, with Northern Ireland and Wales following. 
 +
 +
But the changes of 2023/24 are overtaken by the surprise announcement in the Spring Budget 2024 of the abolition of domicile as a connecting factor for UK tax, from 2025/26, and the replacement of the remittance basis with a short term relief for foreign income/gains.  The next edition of this book will be different from the present, and will have a new title.
  
==The year 2017/18 in review==
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===Simplification/complification===
  
 
OTS stated in 2017:
 
OTS stated in 2017:
  
: The UK tax code is widely cited as being the longest in the world”.<ref>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.</ref>   
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:The UK tax code is widely cited as being the longest in the world”.<ref>It is hard to empirically assess the claim that the UK has the longest tax code in the world, and OTS made no attempt to do so.  But if any readers are aware of other serious contenders for that title, I would be interested to hear.</ref>   
  
This claim had been made at least since 2010.<ref>For the older references see the Introduction to the 15th (2016/17) of this work.</ref>  In recent years Parliament added:<ref>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.
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This claim had been made at least since 2010.<ref>For older references see the Introduction to the 2016/17 edition of this work.</ref>  In recent years Parliament added:<ref>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.
 
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.
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OTS Complexity Index (2012)
 
OTS Complexity Index (2012)
:http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193493/ots_complexity_index_methodology_paper.pdf''</ref>
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:''http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193493/ots_complexity_index_methodology_paper.pdf''</ref>
  
:{|
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{|
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| width="150pt" | || width="200pt" | ||  width="200pt" | ||  width="200pt" | || 
 
|-
 
|-
| FA 2011: || 403 pages
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| '''Finance Act(s)''' || '''Pages'''
 
|-
 
|-
| FA 2012: || 703 pages (a record)
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| 2012 || 703 (a record) || 2018 || 196
 
|-
 
|-
| FA 2013: || 648 pages
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| 2013 || 648 || 2019 || 337
 
|-
 
|-
| FA 2014: || 663 pages
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| 2014  || 668 || 2020 || 217<ref> The unusually short length of the FA 2020 is due to the December 2019 election.</ref>
 
|-
 
|-
| FAs 2015: || 562 pages
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| 2015 || 597 (2 Finance Acts) || 2021 || 428
 
|-
 
|-
| FA 2016: || 649 pages
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| 2016  || 662 || 2022 || 225
 
|-
 
|-
| FA 2017: || 813 (a new record)<ref>This is the combined length of the two FAs  2017.</ref>
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| 2017 || 829 (2 Finance Acts) || 2023 || 416 (2 Finance Acts)
|-
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| FA 2018:  || 187 pages
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|}
 
|}
  
In the same period, OTS has not achieved perceptible improvement, at least in relation to the topics covered in this book. <ref>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?” [2017] BTR 249.
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The Office of Tax Simplification estimated HMRC guidance at 90,000 pages in 2018;<ref>OTS, “Guidance for taxpayers: a vision for the future” (2018) para 1.21These pages have assuredly not been printed or counted. Quantification raises methodological issues which deserve a short essay to itself. We have reached the stage where the amount of HMRC guidance is impossible to quantify: the words are uncountable. Within the limits of guesswork, and assuming 500 words per page (single spacing), the figure of 90,000 pages seems to me to be on the low side. There are 150 HMRC Manuals, just for a start.
:<i>http://www.ifs.org.uk/uploads/publications/TLRC/TLRC_OTS_DP_11.pdf</i>
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In (I think) 2013 the government came up with the slogan “Creating a simpler, fairer tax system” under which OTS now operates; which imagines away a troubling reality in which simplicity and fairness are competing values which require hard choices.
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:<i>https://www.gov.uk/government/policies/creating-a-simpler-fairer-tax-system</i> </ref>
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It is easier to <i>talk</i> of simplification:
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: Our system remains too complicated ... We will therefore simplify the tax system. <ref>Conservative party manifesto 2017 p.14 </ref>
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The reader may think that the satirists better identify the reality:
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: We will further complicate the UK tax system so that large companies can no longer find loopholes. <ref> Official Monster Raving Loony Party Manifesto 2017
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:<i>https://www.loonyparty.com/2017-general-election-manicfesto</i>></ref>
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Scotland continues its fiscal drift from the UK, with Northern Ireland and Wales now following.
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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.
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Perhaps the focus of enquiry should be whether HMRC guidance is too short, because 90,000 pages would not be sufficient to do justice to the topic. The legislation, measured by pages of the Orange & Yellow tax handbooks, can be counted and amounts to 20,836 pages in 2020/21 (that does not include DTAs, which would be another 3,000 pages).  The Tax Cases reports, which began in 1875, and ceased publishing in 2014, reached 82 volumes and did not cover VAT.</ref> whatever the true figure, it will have grown considerably since then.  This guidance was “not comprehensive” - something of an understatement; but according to the OTS “real life cannot be reduced to a neat description in a few (!) pages of writing”.<ref>Para 1.24.</ref> F(no.2)A 2023 abolished the OTS.  In its 12 years of existence, the OTS did not achieve much simplification, at least in relation to topics covered in this book, and I do not think it will be missed.<ref>This view is not unanimous; according to CIOT:
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:“OTS has achieved a great deal”. Letter to Chancellor of the Exchequer (24 October 2022).</ref>
 +
 +
It is easier to ''talk'' of simplification.  In the ill-fated “mini” budget of October 2022:
  
The courts have decided many interesting cases, including <i>Barclays Wealth v HMRC</i>, <i>Barker v Baxendale Walker Solicitors; R (oao) Hely-Hutchinson) v HMRC</i>.
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:the government will embed tax simplification into the institutions of government ...  and set a mandate to HM Treasury and HMRC to focus on simplifying the tax code.<ref>HM Treasury, “The Growth Plan 2022". 
 +
:''https://www.gov.uk/government/publications/the-growth-plan-2022-documents''
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The emphasis, or one might say, rhetoric, of simplification has fluctuated.  OOTLAR 2008 had 45 references to simplification. OOTLAR 2021 had none.  The “Growth Plan 2022” had 15.
 
 
OECD has published the 2017 update to the Model Tax Convention,  
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In (I think) 2013 the government came up with the slogan “Creating a simpler, fairer tax system”, which OTS adopted; it imagines away a troubling reality in which simplicity and fairness are competing values which require hard choices.
 +
:''https://www.gov.uk/government/policies/creating-a-simpler-fairer-tax-system''</ref>
 +
 +
The reader may think that satirists better identify the reality:
  
OECD has produced the BEPS convention, noting, I think correctly:
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: We will further complicate the UK tax system so that large companies can no longer find loopholes.<ref> Official Monster Raving Loony Party Manifesto 2017
 
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:<i>https://www.loonyparty.com/2017-general-election-manicfesto</i>></ref>
: International tax issues have never been as high on the political agenda as they are today.  
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The growth in complexity is matched by a decline in HMRC efficiency. A contribution to the Trusts Discussion Forum provides:
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: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.
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Spring Budget 2024 announced the abolition of furnished holiday letting relief from 2025/26. This will be a simplification; though that is not much to set against the size of this year’s two Finance Acts.
: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.<ref>6 October 2017 under thread “HMRC delays”.
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:See http://trustsdiscussionforum.co.uk</ref>
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==The future==
 
==The future==
  
2020 will bring property income of non-resident companies into the scope of corporation tax.
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We face an extended period of change and uncertainty, in politics, economics, law and taxation, and will continue to live in fiscally exciting times.
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In 2021 the proposed Registration of Overseas Entities Act will set up a beneficial ownership register of overseas entities that own UK property.
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Budget 2018 provides:
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:As announced at Autumn Budget 2017, the government will publish a consultation on the taxation on trusts, to make the taxation of trusts simpler, fairer and more transparent.
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==Thanks ...and request for help==
  
The paper was published 7 November 2018.<ref>''https://www.gov.uk/government/consultations/the-of-taxation-of-trusts-a-review''</ref> It is not so much facile as vacuousThe tenor is that “we think something should be done, but do not know what”.  It is not possible to guess what will ultimately emerge from the process of the review, or at least, studying this paper will not assist in the guesswork.
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I am very grateful to my colleagues in chambers, especially Robert Venables KC, Philip Simpson KC and Rory Mullen KC, for discussions on many aspects of taxYijia Liu as research assistant resolved many puzzlesI owe a great debt to Jane Hunt and Ruth Shaw who work committedly on this text throughout the year.
 
 
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.
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Comments from my readers and clients continue to be of the greatest value and interest.  I am very grateful to all who commented, and in particular to John Barnett and Sam Dewes (who commented on a variety of topics), and Mark Pearce (cryptoassets).  In order not to be defeated by the size of this work, readers' help is needed more than everIf anyone would like to offer to write or revise a section - or chapter - of this book please get in touch.
 
 
We face an extended period of change and uncertainty, in politics, economics, law and taxation.  
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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.  On the basis of what is known at 1 April 2024, and assuming the F(no.2) Bill 2024 is enacted in its present form, it seeks to state the law for 2024/25.  
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We will continue to live in fiscally exciting times.
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==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.
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{|
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| width="300pt" | || width="20pt" | || width="90pt" |   
Comments from readers and professional clients continue to be of the greatest value and interest to the author.
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|-
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| James Kessler KC ||
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.
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|-
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| Old Square Tax Chambers ||
 +
|-
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| 15 Old Square<br/>Lincoln’s Inn<br/>WC2A 3UE || || ''kessler@kessler.co.uk''<br/>''https://www.kessler.co.uk ''
 +
|-
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|}
  
==Further advice==
+
==Obtaining Further Advice - And Disclaimer==
  
If you want advice on which you are legally entitled to rely you can obtain it - but not from this work.
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===Further advice===
  
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 <i>http://www.kessler.co.uk</i>.
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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'' https://www.kessler.co.uk https://www.kessler.co.uk''
  
==TFD Online==
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===TFD Online===
  
 
TFD Online is an online version of this book and more.  It can be used:
 
TFD Online is an online version of this book and more.  It can be used:
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(3)  to correct or contribute to the book
 
(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.  
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TFD Online is moderated by [https://www.taxchambers.com/team/rebecca-sheldon/ Rebecca Sheldon], a member of Tax Chambers, 15 Old Square, Lincoln’s Inn.  
 
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TFD Online is accessible on <i>http://www.foreigndomiciliaries.co.uk</i>. An authorisation code for a 3 week trial period is in the inside cover of this volume.
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TFD Online is accessible on ''https://www.foreigndomiciliaries.co.uk'' An authorisation code for a 3 week trial period is in the inside cover of volume 1.
  
==Disclaimer==
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===Disclaimer===
  
CIOT issue <i>professional guidance</i> with a disclaimer:
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The professional bodies issue the <i>Professional Conduct in Relation to Taxation </i> 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.<ref>CIOT, <i>Professional Conduct in Relation to Taxation</i> (2015), para 1.10
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:While every care has been taken in the preparation of this guidance<ref>PCRT is not in fact guidance: it is mandatory</ref> 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 not be taken to substitute appropriate legal advice.<ref><i>Professional Conduct in Relation to Taxation</i> (2019), Forward.
 +
:<i>https://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation</i>
 +
The second sentence is an improvement on the common form that guidance on legal issues “does not constitute legal advice”. That seems an idiosyncratic use of the word “advice"”; but for the meaning of “advice” see [[Customer Due Diligence#Tax adviser | Tax adviser]]</ref>
  
<i>http://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation</i>
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When that appeared in 2011 it seemed extraordinary.  But nowadays no professional body issues guidance without a disclaimer.<ref> 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.”  </ref>   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 on this work.  But could anyone have thought that a claim might arise in absence of this disclaimer?
  
The second sentence is an improvement on the common but rather bizarre form that guidance on legal issues “does not constitute legal advice”.</ref>
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===A note to the lay reader===
  
When that appeared in 2011 it seemed extraordinaryBut it rapidly became ubiquitous; nowadays no professional body ever issues guidance without a disclaimer<ref>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.” </ref>   Similarly, and <i>a fortiori</i>, the views expressed in this book are put forward for consideration only and are not to be relied uponNeither 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?
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This book is not intended as a self-help guide, and is addressed to tax practitionersIn 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 has become much more complicatedHowever, initiation in these matters must often be by the taxpayerIf 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. 
  
==A note to the lay reader==
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===Edition history===
  
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. 
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==Edition history==
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{|
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| width="200pt" | ||width="200pt" | ||width="200pt" | ||width="200pt" | ||
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|-
 
|-
| 1<sup>st</sup> 2001 || 5<sup>th</sup> 2006 || 9<sup>th</sup> 2010 || 13<sup>th</sup> 2014
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| 1<sup>st</sup> 2001 || 8<sup>th</sup> 2009  || 15<sup>th</sup> 2016 || 23<sup>rd</sup> 2023
 
|-
 
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| 2<sup>nd</sup> 2003 || 6<sup>th</sup> 2007 || 10<sup>th</sup> 2011 || 14<sup>th</sup> 2015
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| 2<sup>nd</sup> 2003 || 9<sup>th</sup> 2010  || 16<sup>th</sup> 2017
 
|-
 
|-
| 3<sup>rd</sup> 2004 || 7<sup>th</sup> 2008 || 11<sup>th</sup> 2012 || 15<sup>th</sup> 2016
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| 3<sup>rd</sup> 2004 || 10<sup>th</sup> 2011 || 17<sup>th</sup> 2018
 
|-
 
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| 4<sup>th</sup> 2005 || 8<sup>th</sup> 2009 || 12<sup>th</sup> 2013 || 16<sup>th</sup> 2017
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| 4<sup>th</sup> 2005 || 11<sup>th</sup> 2012  || 18<sup>th</sup> 2019
|}
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|-
 
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| 5<sup>th</sup> 2006 || 12<sup>th</sup> 2013 || 19<sup>th</sup> 2020
This book was called <i>Taxation of Foreign Domiciliaries</i> for 9 editions; it changed to <i>Taxation of Non-Residents and  Foreign Domiciliaries</i> in the 10<sup>th</sup> edition.
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|-
 
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| 6<sup>th</sup> 2007 || 13<sup>th</sup> 2014  || 20<sup>th</sup> 2021
:James Kessler QC
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|-
:Old Square Tax Chambers
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| 7<sup>th</sup> 2008 || 14<sup>th</sup> 2015 || 21<sup>st</sup> 2022
:15 Old Square           
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|}
:Lincoln's Inn               
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:WC2A 3UE
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http://www.kessler.co.uk</i>
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This book was called <i>Taxation of Foreign Domiciliaries</i> for 9 editions; it changed to <i>Taxation of Non-Residents and Foreign Domiciliaries</i> in the 10<sup>th</sup> edition.<ref>The text of [https://www.foreigndomiciliaries.co.uk/index.php/Archive_editions earlier editions] is available on ''https://www.foreigndomiciliaries.co.uk'' </ref>
  
 
== Footnotes==
 
== Footnotes==
  
 
<references/>
 
<references/>

Latest revision as of 07:03, 17 September 2024

To view this Introduction in pdf format, click here: Introduction And What's New

Scope of this book

There are three original 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, and if books could burst, this one might. But these territorial issues must be understood in a wider context: in taxation, as in life, everything is connected. So I discuss private client topics which go beyond the original themes of this book:

  • substantial: fundamental terms and concepts, and tax avoidance codes
  • procedural: disclosure/compliance, tax return filing positions, CDD, TRS

A statute-focussed approach

I set out statutory and other material verbatim:

... in the end we must always return to the words of the statute[1]

Returning to the verbatim text, it is surprising how often one finds that the words do not say what one expects.

This is not just a common law approach. Richard Hyland tells this story of his class at Université Paris II Panthéon-Assas:[2]

Mme Gobert asked simply: L’article 2 du Code civil, qu’est-ce qu’il dit? Article 2 of the Civil Code, what does it say?
My classmates were some of the best private law students in France. This was a question to which they knew the answer. One of them explained that article 2 provides for the nonretroactivity of the law. Mme Gobert looked at the student without smiling. Then she repeated the question. L’article 2 du Code civil, qu’est-ce qu’il dit? A different student mentioned Paul Roubier’s suggestion that a new law may be applied to les situations juridique en cours. Again she repeated the question. L’article 2 du Code civil, qu’est-ce qu’il dit? Another student tried, and then another, each new voice attempting yet a more refined statement of the concepts involved. After each comment she responded in the same way. It was my first French law class, so I did not know what to think. It seemed like a Zen-like version of the Socratic method. The French students were terrified. This was material they thought they knew, and yet they could not guess what was on her mind. Finally, one of the students had the presence of mind simply to read the code provision aloud. Mme Gobert’s eyes lit up. Mais bien sûr! she responded C’est ça qu’il dit!

The year 2023/24 in review, and the future

HMRC have had an unbroken run of successes establishing a UK domicile. Fisher finally reached Supreme Court, only to be promptly reversed by the F(no.2)A 2024. We have the first case on the statutory residence test, introduced in 2013 (A Taxpayer v HMRC), now on the way to the Court of Appeal, and the first on the remittance basis, introduced in 2008 (Seghal v HMRC). Scotland continues its fiscal drift from the UK, with Northern Ireland and Wales following.

But the changes of 2023/24 are overtaken by the surprise announcement in the Spring Budget 2024 of the abolition of domicile as a connecting factor for UK tax, from 2025/26, and the replacement of the remittance basis with a short term relief for foreign income/gains. The next edition of this book will be different from the present, and will have a new title.

Simplification/complification

OTS stated in 2017:

The UK tax code is widely cited as being the longest in the world”.[3]

This claim had been made at least since 2010.[4] In recent years Parliament added:[5]

Finance Act(s) Pages
2012 703 (a record) 2018 196
2013 648 2019 337
2014 668 2020 217[6]
2015 597 (2 Finance Acts) 2021 428
2016 662 2022 225
2017 829 (2 Finance Acts) 2023 416 (2 Finance Acts)

The Office of Tax Simplification estimated HMRC guidance at 90,000 pages in 2018;[7] whatever the true figure, it will have grown considerably since then. This guidance was “not comprehensive” - something of an understatement; but according to the OTS “real life cannot be reduced to a neat description in a few (!) pages of writing”.[8] F(no.2)A 2023 abolished the OTS. In its 12 years of existence, the OTS did not achieve much simplification, at least in relation to topics covered in this book, and I do not think it will be missed.[9]

It is easier to talk of simplification. In the ill-fated “mini” budget of October 2022:

the government will embed tax simplification into the institutions of government ... and set a mandate to HM Treasury and HMRC to focus on simplifying the tax code.[10]

The reader may think that satirists better identify the reality:

We will further complicate the UK tax system so that large companies can no longer find loopholes.[11]

Spring Budget 2024 announced the abolition of furnished holiday letting relief from 2025/26. This will be a simplification; though that is not much to set against the size of this year’s two Finance Acts.

The future

We face an extended period of change and uncertainty, in politics, economics, law and taxation, and 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 KC, Philip Simpson KC and Rory Mullen KC, for discussions on many aspects of tax. Yijia Liu as research assistant resolved many puzzles. I owe a great debt to Jane Hunt and Ruth Shaw who work committedly on this text throughout the year.

Comments from my readers and clients continue to be of the greatest value and interest. I am very grateful to all who commented, and in particular to John Barnett and Sam Dewes (who commented on a variety of topics), and Mark Pearce (cryptoassets). In order not to be defeated by the size of this work, readers' help is needed more than ever. If anyone would like to offer to write or revise a section - or chapter - of this book please get in touch.

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. On the basis of what is known at 1 April 2024, and assuming the F(no.2) Bill 2024 is enacted in its present form, it seeks to state the law for 2024/25.


James Kessler KC
Old Square Tax Chambers
15 Old Square
Lincoln’s Inn
WC2A 3UE
[email protected]
https://www.kessler.co.uk

Obtaining Further Advice - And Disclaimer

Further advice

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 https://www.kessler.co.uk https://www.kessler.co.uk

TFD Online

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 Rebecca Sheldon, a member of Tax Chambers, 15 Old Square, Lincoln’s Inn.

TFD Online is accessible on https://www.foreigndomiciliaries.co.uk An authorisation code for a 3 week trial period is in the inside cover of volume 1.

Disclaimer

The professional bodies issue the Professional Conduct in Relation to Taxation with a disclaimer:

While every care has been taken in the preparation of this guidance[12] 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 not be taken to substitute appropriate legal advice.[13]

When that appeared in 2011 it seemed extraordinary. But nowadays no professional body issues guidance without a disclaimer.[14] 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 on this work. But could anyone have thought that a claim might 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 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.

Edition history

1st 2001 8th 2009 15th 2016 23rd 2023
2nd 2003 9th 2010 16th 2017
3rd 2004 10th 2011 17th 2018
4th 2005 11th 2012 18th 2019
5th 2006 12th 2013 19th 2020
6th 2007 13th 2014 20th 2021
7th 2008 14th 2015 21st 2022

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.[15]

Footnotes

  1. R.F.C. 2012 Plc v AG [2017] UKSC 46 (the Rangers case) at [11]; see A judicial gloss
  2. Hyland. Gifts: A study in comparative law, 1st ed (1989) p.xvi.
  3. It is hard to empirically assess the claim that the UK has the longest tax code in the world, and OTS made no attempt to do so. But if any readers are aware of other serious contenders for that title, I would be interested to hear.
  4. For older references see the Introduction to the 2016/17 edition of this work.
  5. 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)
    https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193496/ots_length_legislation_paper.pdf
    OTS Complexity Index (2012)
    http://www.gov.uk/government/uploads/system/uploads/attachment_data/file/193493/ots_complexity_index_methodology_paper.pdf
  6. The unusually short length of the FA 2020 is due to the December 2019 election.
  7. OTS, “Guidance for taxpayers: a vision for the future” (2018) para 1.21. These pages have assuredly not been printed or counted. Quantification raises methodological issues which deserve a short essay to itself. We have reached the stage where the amount of HMRC guidance is impossible to quantify: the words are uncountable. Within the limits of guesswork, and assuming 500 words per page (single spacing), the figure of 90,000 pages seems to me to be on the low side. There are 150 HMRC Manuals, just for a start. Perhaps the focus of enquiry should be whether HMRC guidance is too short, because 90,000 pages would not be sufficient to do justice to the topic. The legislation, measured by pages of the Orange & Yellow tax handbooks, can be counted and amounts to 20,836 pages in 2020/21 (that does not include DTAs, which would be another 3,000 pages). The Tax Cases reports, which began in 1875, and ceased publishing in 2014, reached 82 volumes and did not cover VAT.
  8. Para 1.24.
  9. This view is not unanimous; according to CIOT:
    “OTS has achieved a great deal”. Letter to Chancellor of the Exchequer (24 October 2022).
  10. HM Treasury, “The Growth Plan 2022".
    https://www.gov.uk/government/publications/the-growth-plan-2022-documents
    The emphasis, or one might say, rhetoric, of simplification has fluctuated. OOTLAR 2008 had 45 references to simplification. OOTLAR 2021 had none. The “Growth Plan 2022” had 15. In (I think) 2013 the government came up with the slogan “Creating a simpler, fairer tax system”, which OTS adopted; it imagines away a troubling reality in which simplicity and fairness are competing values which require hard choices.
    https://www.gov.uk/government/policies/creating-a-simpler-fairer-tax-system
  11. Official Monster Raving Loony Party Manifesto 2017
    https://www.loonyparty.com/2017-general-election-manicfesto>
  12. PCRT is not in fact guidance: it is mandatory
  13. Professional Conduct in Relation to Taxation (2019), Forward.
    https://www.tax.org.uk/professional-standards/professional-rules/professional-conduct-relation-taxation
    The second sentence is an improvement on the common form that guidance on legal issues “does not constitute legal advice”. That seems an idiosyncratic use of the word “advice"”; but for the meaning of “advice” see Tax adviser
  14. 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.”
  15. The text of earlier editions is available on https://www.foreigndomiciliaries.co.uk