Introduction
Updated for 2020/21 edition
| me gustaría ser un nido si fueras un pajarito | I’d like to be your nest, if you were a nestling |
| me gustaría ser una bufanda si fueras un cuello y tuvieras frío | I’d like to be your scarf, if you were a neck and felt cold |
| si fueras música yo sería un oído | If you were music I’d be an ear |
| si fueras agua yo sería un vaso | If you were water I’d be a glass |
| si fueras luz yo sería un ojo | If you were light I’d be an eye |
| si fueras pie yo sería un calcetín | If you were a foot I’d be a sock |
| si fueras el mar yo sería una playa | If you were the sea I’d be the beach |
| y si fueras todavía el mar yo sería un pez | And if you were still the sea, I’d be a fish |
| y nadaría por ti | And I’d swim in you |
| y si fueras el mar yo sería sal | And if you were the sea I’d be salt |
| y si yo fuera sal | And if I were salt |
| tú serías una lechuga | You’d be a lettuce |
| una palta o al menos un huevo frito | An avocado, or at least a fried egg |
| y si tú fueras un huevo frito | And if you were a fried egg |
| yo sería un pedazo de pan | I’d be a slice of bread |
| y si yo fuera un pedazo de pan | And if I were a slice of bread |
| tú serías mantequilla o mermelada | You’d be butter or jam |
| y si tú fueras mermelada | And if you were jam |
| yo sería el durazno de la mermelada | I’d be the fruit in the jam |
| y si yo fuera un durazno | If I were a peach |
| tú serías un árbol | You’d be a tree |
| y si tú fueras un árbol | And if you were a tree |
| yo sería tu savia y correría | I’d be your sap; I would flow |
| por tus brazos como sangre | Through your arms, like blood |
| y si yo fuera sangre | And if I were blood |
| viviría en tu corazón. | I would live in your heart. |
Claudio Bertoni
Contents
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 territorial limits to UK taxation, and extends to other topics, such as disclosure and compliance, which often arise in this context.
The year 2019/20 in review
OTS stated in 2017:
- The UK tax code is widely cited as being the longest in the world”.[1]
This claim had been made at least since 2010.[2] In recent years Parliament added:[3]
| Finance Act(s) | Pages | |
| 2012 | 703 pages (a record) | |
| 2013 | 648 pages | |
| 2014 | 663 pages | |
| 2015 | 562 pages (2 Finance Acts) | |
| 2016 | 649 pages | |
| 2017 | 813 (a new record)[4] | |
| 2018 | 196 | |
| 2019 | 328 | |
| 2020 | 186 |
The unusually short length of the 2020 finance bill is likely due to the December 2019 election.
In the same period, OTS has not achieved any perceptible improvement, at least in relation to the topics covered in this book. [5]
It is easier to talk of simplification:
- Our system remains too complicated ... We will therefore simplify the tax system. [6]
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. [7]
Scotland continues its fiscal drift from the UK, with Northern Ireland and Wales following.
The most important change of the year is the move from IT to CT on property income of non-resident companies.
FA 2020 introduced important changes; those closest to the themes of this book are:
- New IHT excluded property rules for gifts to trusts and transfers between trusts
- Revisions to CGT private residence relief
The Fifth Anti-Money Laundering Directive takes effect.
The courts have decided too many cases to list them all; of particular interest are Embiricos v HMRC on closure notices in domicile appeals; Fisher v HMRC and Rialas v HMRC on TOAA; HMRC v Hyrax Resourcing on avoidance; Jimenez (oao) R v First-tier Tribunal on territorial limitation.
The BEPS multilateral instrument has come into force and the number of DTAs which incorporate its terms gradually increases. OECD has noted, 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. The House of Lords Economic Affairs Committee issued an important report, recording:
- in compliance and enquiry cases, the behaviour of some HMRC staff falls well below the standard set in the Charter. HMRC needs to have better systems in place to identify and address any problem behaviours as a matter of urgency.[8]
The future
In 2021 the proposed Registration of Overseas Entities Act will set up a beneficial ownership register of overseas entities that own UK property.
Budget 2018 provided:
- the government will publish a consultation on the taxation on trusts, to make the taxation of trusts simpler, fairer and more transparent.
A call for evidence (misdescribed as a consultation document) was published November 2018.[9] It is not possible to guess what will emerge from the process of the review; or at least, studying this paper will not assist in the guesswork.
We face an extended period of change and uncertainty, in politics, economics, public health, 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. Shaun Fu and Aditya Vora as research assistants 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 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. On the basis of what is known at 30 April 2020, it seeks to state the law for 2020/21.
| James Kessler QC | ||
| Old Square Tax Chambers | ||
| 15 Old Square | [email protected] | |
| Lincoln’s Inn | https://www.kessler.co.uk | |
| WC2A 3UE |
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 Ross Birkbeck, 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 this volume.
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[10] 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.[11]
When that appeared in 2011 it seemed extraordinary. But nowadays no professional body issues guidance without a disclaimer.[12] 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 | 10th 2011 | |
| 2nd 2003 | 11th 2012 | |
| 3rd 2004 | 12th 2013 | |
| 4th 2005 | 13th 2014 | |
| 5th 2006 | 14th 2015 | |
| 6th 2007 | 15th 2016 | |
| 7th 2008 | 16th 2017 | |
| 8th 2009 | 17th 2018 | |
| 9th 2010 | 18th 2019 |
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.
Footnotes
- ↑ 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 are 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) OTS Complexity Index (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?” [2017] BTR 249. 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.
- ↑ Conservative party manifesto 2017 p.14 OOTLAR 2008 has 45 references to simplification
- ↑ Official Monster Raving Loony Party Manifesto 2017
- ↑ HL Economic Affairs Committee“The Powers of HMRC: Treating Taxpayers Fairly” (2018) para 157. Also see Pokorowski v HMRC [2019] UKFTT 0086 (TC). The taxpayer had lost his job, exhausted his savings, was evicted from his house, and his belongings were thrown into the street where they were lost or stolen. The taxpayer failed to submit his return on time. The Tribunal said that “HMRC's decision to pursue Mr Pokorowski for penalties in the circumstances of this appeal is a scandal.”
- ↑ HMRC, “The Taxation of Trusts: A Review (Nov 2018)
- ↑ PCRT is not in fact guidance: it is mandatory
- ↑ Professional Conduct in Relation to Taxation (2019), Forward. 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.”
