Review by Paul Hotchkiss, KPMG
This book comprises 841 pages in 40 chapters of what is invaluable insight into the taxation of foreign domiciliaries. What sets this book apart is that it is possible to read it from beginning to end (this possibility being ably assisted by the authors’ “Plain English” writing style and clear in-depth understanding of the subject matter). I confess, however, that I found it very difficult to read in this fashion: I found myself constantly flicking from page to page and chapter to chapter as my own understanding of the various topics was challenged or confirmed and having client scenarios always sitting at the back of my mind. In addition to this I found the book very easy to pick up, open at any page and to start reading – always finding something of interest to capture my attention.
The book’s main use is clearly for reference and in this regard is simply superb; well indexed using legislation, tax cases and an easy to use general index. Whilst the book is specifically set out not to cover planning strategies the author does, throughout the book, leave the reader little snippets of ideas or possibilities to consider which may form the basis of possible planning ideas. I like this style because it encourages the reader to challenge his or her own understanding of the subject matter at hand and get the grey cells going.
Whilst many practitioners like me are still getting used to ITTOIA, this book is invaluable in dragging those who are still thinking in terms of ICTA up to date: cross references to the old sections in the footnotes would, however, have been useful
Particular areas of interest
I found the sections on remittances, section 739/740 and 741 particularly helpful. All these chapters are quite lengthy and are dealt with in great depth and I relish the prospect of the next edition when the author will no doubt deal with sections 741A and 741B, which will perhaps restrict the current debate in the book concerning section 741 (nearly 51 pages).
In addition to this the short section on offshore funds is particularly helpful, as is the discussion on the interaction of section 87 TCGA 1992 and section 740 ICTA 1998.
Suggestions
From my own perspective I found the reference to books by other authors a little frustrating: but clearly it is impossible to cover all the fringe topics in the same text and thus this is perhaps inevitable. I was particularly disappointed that the book did not explore the interaction of double tax treaties and section 739 (a subject particularly close to my heart!) but can understand that such specifics are perhaps beyond the scope of the book as UK domiciliaries are equally affected.
I thought the author could expand the section on Domicile (some 23 pages), although he does request the reader to refer to Dicey and Morris should the reader require any further discussion on the topic. I did feel some reference should be made to second generation “domiciliaries”: in my experience the main difficulty facing most UK resident non-UK domiciliaries is that of recognition of domicile, ie are they UK domiciled or not, especially if they have been UK resident for some time and may or may not leave the UK in the future. There is still much confusion in this area and the book only dedicates one or two pages to this matter. The author could also slightly expand on domicile testing, ie how often should the taxpayer approach HMRC – so many non-domiciliaries test their domicile only once and then rely on the ruling many years later.
In addition I have found many non-UK domiciliaries starting to increasingly consider the use of foundations, based in, say, Liechtenstein, in preference to the “traditional” trust and company structures. Indeed some offshore jurisdictions, eg Jersey (I think), have recently introduced legislation to enable foundations to be established in the jurisdiction. It may be useful if the author covered this topic in future editions. There are of course other entities such as Protected Cell Companies, Purpose Trusts and similar but where do you stop!
From a practical perspective it might be useful if the book reinforced the need for offshore trustees to retain records of income/capital gains/trust additions and who made them. So often is the case that records are not retained in the right format or at all and beneficiaries are left wanting. In addition a section on choosing trustee investments may also help widen the readership to offshore trustees – one of the main questions we are asked as advisers is “what should we invest in to ensure the UK resident beneficiary is not penalised from a tax perspective?” Whilst the book clearly talks about the tax treatment of various investment types, for example, how investment in non-qualifying offshore funds may assist in relation to section 740, some sort of summary or dedicated section might be useful.
In the section on remittances there is a fantastic discussion of Harmel v Wright and similar: this is invaluable to explain the principles. However, whilst the examples used are very simple by necessity some “live” examples might demonstrate how the remittance basis works practically. The reason I say this is that most offshore structures do not just consist of a single trust and company and they are often very complex and involved.
Whilst I recognise the inevitable difficulties in doing this it may help the reader understand the subject – but I also understand that the book is designed to discuss the underlying principles and perhaps putting complex examples in may be a step too far.
Who should buy this book?
Clearly this book is aimed at the tax practitioner as a reference book; however, in my view it has wider appeal, for example all offshore trustees/company agents and their clients/beneficiaries could benefit from referring to it. The way it is written opens up the target audience and many trustees and possibly clients would definitely benefit from reading it – even if only to get an overview of their or their beneficiaries (or clients) tax position. There are so many occasions where offshore structures get out of hand and unwieldy because of lack of tax advice and lack of understanding of the basic principles. This is particularly true where offshore structures are established by non-UK residents and then one of the beneficiaries becomes UK-resident.
From my perspective I constantly make reference to the book and in no way detracting from the current edition I am already looking forward to the next. It appears that the taxation of foreign domiciliaries is inevitably poised to change in the coming years and practitioners are very fortunate to have the author producing this book on such a regular basis to keep them updated and to provide invaluable insight that it does.
In short this book is brilliantly crafted and blends the author’s ability to get across complex matters in simple terms.
The Tax Journal
Issue no. 830
27 March 2006
LexisNexis
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