Introduction

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 rather 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.

Brexit

The referendum of 23 June 2016 is a decision of immense significance. We face an extended period of uncertainty, in politics, economics, law and taxation. Readers may agree with Martin Wolf, chief economics commentator at the FT, who commented on the day after the referendum (I omit some of his invective):

The Conservatives will now end up with new leadership. They will then have to do what the Brexiters failed ... to do during their ... campaign, namely, map out a strategy and tactics for unravelling the UK's connections with the EU. This will probably consume the energies of that government and its successors over many years.

In the medium and long term, say the next 5-10 years, changes will be profound. In the short term - for the next two years or so - matters will proceed more or less as in the past.

The year 2015/16 in review

The chancellor stated in 2011:

Our tax code has become so complex that it recently overtook India to become the longest in the world.

Parliament subsequently added:

FA 2011: 403 pages

FA 2012: 703 pages (a record)

FA 2013: 648 pages

FA 2014: 663 pages

FAs 2015: 562 pages

FA 2016: 583 pages

In the same period, the OTS has achieved little.

The choice of India as comparator was strange. Four years of Indian Finance Acts together are shorter than any single UK finance act since 1999. The graph speaks for itself.

It is easier to talk of simplification. Budget 2014 used the word simplification 23 times; even including a reference to simplifying partnership taxation! Those who have wrestled with the FA 2014 partnership provisions may smile, grimly. In Budget 2015 the word was used 17 times, rising to 36 times in Budget 2016.

Scotland continues its fiscal drift from the UK, with Wales set to follow in due course.

The FA 2016 has abolished tax credits, a far reaching reform on dividend taxation, reduced CGT rates, and (yet again) recast the transactions in securities rules. It has extended the scope of taxation of royalties and transactions in UK land.

An (I think, novel) development is the enactment of tax reliefs whose effect, or full effect, is postponed until 2020, election year, with a view to minimising cost and maximising political benefit. Examples are the reduction in CT rates; the IHT residence nil rate band (which may claim a prize for unnecessary tax complication); and investors's relief for CGT.

The Courts have decided many interesting cases, including:

Bowring v HMRC [2015] UKUT 550 (TCC) upholding flip-flop schemes.

Hely-Hutchinson, R (oao) v HMRC [2015] EWHC 3261 (Admin) requiring fairness where HMRC withdraw a statement of practice or concession.

In the last edition of this work I said Anson v HMRC has resolved the status of US LLCs. How wrong! HMRC have announced that they do not intend to follow the Supreme Court decision, so the dispute will continue for another round.

More wisely, and as anticipated in this work, HMRC backtracked on its demand to repay pre-2014 loans secured on foreign income/gains or face the penalty of a remittance basis charge.

The OECD has produced its final set of BEPS reports, noting, I think correctly, that "International tax issues have never been as high on the political agenda as they are today."

2017 will bring the commencement of the new deemed domicile rule and IHT transparency for companies, unexpected announcements in Summer Budget 2015.

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, Amanda Hardy QC and Philip Simpson QC, for discussions on many aspects of tax. Emma Lidström undertook the daunting task of copy editor. 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. This online version seeks to state the law as at 1 September 2016.

James Kessler QC

Old Square Tax Chambers

15 Old Square

Lincoln's Inn

WC2A 3UE

[email protected]

http://www.kessler.co.uk

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 http://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 Oliver Marre, a member of Tax Chambers, 15 Old Square, Lincoln's Inn.

TFD Online is accessible on http://www.foreigndomiciliaries.co.uk. An authorisation code is in the inside cover of this volume.

Disclaimer

CIOT issue professional guidance with a disclaimer:

While every care has been taken in the preparation of this guidance CIOT ... do not undertake a duty of care or otherwise (?) for any loss or damage occasioned by reliance on this guidance.

When that appeared in 2011 it seemed extraordinary. But it rapidly became ubiquitous; nowadays no professional body ever issues guidance without a disclaimer (often including a statement, which seems bizarre to me, that guidance on the law "does not constitute legal advice".) 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 any 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, but it is readable for a lay person. 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

1^st Edition 2001 5^th Edition 2006 9^th edition 2010 13^th edition 2014

2^nd Edition 2003 6^th edition 2007 10^th edition 2011 14^th edition 2015

3^rd Edition 2004 7^th edition 2008 11^th edition 2012 15^th edition 2016

4^th Edition 2005 8^th edition 2009 12^th edition 2013

This book was called Taxation of Foreign Domiciliaries for 9 editions; it changed to Taxation of Non-residents & Foreign Domiciliaries in the 10^th edition.