Taxation of Foreign Domiciliaries

One of the features of the UK tax regime which makes this country attractive as a place to live for wealthy foreign nationals is taxation treatment of UK residents who are not ‘domiciled’ in the UK. Non-UK domiciled residents who are well advised are currently able to avoid UK taxation on all income arising from a non-UK source, and on all gains and assets wherever situated, assuming that UK source gains are realised by offshore companies and UK situs assets are placed in the ownership of offshore companies.

This is a broad-brush statement, and the devil is in the detail, which is of enormous complexity. Mr James Kessler QC has written an analysis of this detail in a book which is comprehensive, thorough and so well organised that Taxation of Foreign Domiciliaries is an essential buy for any person giving professional guidance to UK resident but non-UK domiciled clients in the incorporation of offshore companies, or the creation of offshore trusts.

The book is divided into 45 chapters which deal with such key areas as: domicile; the residence of individuals and of trustees; the remittance basis of assessment; the taxation of employment income and trading and property income; settlor-interested trusts; ss 739-741 of the Income and Corporation Taxes Act 1988; life policies and contracts; offshore funds; capital gains tax; loans for non-resident companies; inheritance planning (broken down into eight chapters); the pre-owned assets charge; and the situs of assets for capital gains tax and inheritance tax purposes.

The chapter on domicile (chapter 3) was reproduced in article form in the previous issue of this Journal. It is typical of the rest of the chapters of the book, which are all lucid, well-structured, and packed with statutory references and case-law authority (which is ideal for practitioners, and I believe Taxation of Foreign Domiciliaries is best described as a practitioner’s book). Like everything which issues from Mr Kessler’s pen, Taxation of Foreign Domiciliaries is not only well written, but often amusing, which is a rare boon for those of us who have to read tax analysis on a regular basis.^¹

The book costs a mere £125. This is extremely good value. General practitioners in the area of tax and trusts will quickly recoup this cost in the time they save in research of client enquiries on topics which are comprehensively covered in this publication.

1 A good example is Mr Kessler’s wry commentary on HMRC’s Statement of Practice A 10 for airline pilots. The Statement considers among other things whether a single take off and landing can be regarded as a ‘core duty’ of a pilot’s employment: ‘SPA 10 states that a single take off and landing is normally disregarded, but I am unable to think of any case where the normal practice would not be applied. So in the event of a mid-air emergency in the vicinity of the UK, the pilot can concentrate on the landing without worrying about UK tax – as long as he does not face two such emergencies in the same tax year’.