The CIOT and ICAEW have expressed their concerns at an HMRC’s policy change this month that means unremitted collateral for commercial loans of non-domiciled individuals would be taxed in the UK as a remittance. HMRC withdrew the concessional treatment contained in its Residence, Domicile & Remittance Basis Manual at RDRM33170 in respect of commercial loans, under which only servicing payments are taxed as remittances and not the underlying collateral, from 4 August.
The change means that money brought to or used in the UK under a loan facility secured by foreign income or gains will be treated as a taxable remittance of that amount of foreign income or gains. If the loan is serviced or repaid from different foreign income or gains, the repayments of capital and interest will constitute remittances in the normal way. HMRC will not seek additional tax on existing arrangements, provided certain undertakings are given by 31 December 2015 involving repayment of the loan by 5 April 2016.
The CIOT expressed its concern that the move was taken without prior consultation, questioning ‘whether all aspects of the change had been fully thought through by the government’. Spokesperson John Barnett said: ‘We will be writing to HMRC to raise these and other concerns about the proposals. It is disappointing that we are having to raise these concerns now, after the proposal has been announced, rather than having the opportunity to comment in advance. Non-doms were told in 2010 that there would be no further changes this parliament. This was to give certainty to foreigners seeking to invest in this country. Making changes without consultation in this way does not enhance the UK’s reputation as a place to do business with certainty. While the CIOT will always support efforts to clamp down on avoidance, this change will catch many commercial situations.’
Meanwhile, the ICAEW tax faculty team drily noted that: ‘HMRC seems to have a habit of slipping out bad news when it thinks people are on holiday’, adding: ‘The change of view means that the use of the foreign income and gains as collateral will be treated as a remittance as well as the servicing payments, a double tax charge. When the remittance basis rules were being discussed with HMRC in 2008 this particular point about the possibility of a double tax charge was raised and HMRC said its view that there was no double tax charge was based on an interpretation of the law and was not concessionary. To now call it a concession making it simple to change the position seems disingenuous.’
The CIOT and ICAEW have expressed their concerns at an HMRC’s policy change this month that means unremitted collateral for commercial loans of non-domiciled individuals would be taxed in the UK as a remittance. HMRC withdrew the concessional treatment contained in its Residence, Domicile & Remittance Basis Manual at RDRM33170 in respect of commercial loans, under which only servicing payments are taxed as remittances and not the underlying collateral, from 4 August.
The change means that money brought to or used in the UK under a loan facility secured by foreign income or gains will be treated as a taxable remittance of that amount of foreign income or gains. If the loan is serviced or repaid from different foreign income or gains, the repayments of capital and interest will constitute remittances in the normal way. HMRC will not seek additional tax on existing arrangements, provided certain undertakings are given by 31 December 2015 involving repayment of the loan by 5 April 2016.
The CIOT expressed its concern that the move was taken without prior consultation, questioning ‘whether all aspects of the change had been fully thought through by the government’. Spokesperson John Barnett said: ‘We will be writing to HMRC to raise these and other concerns about the proposals. It is disappointing that we are having to raise these concerns now, after the proposal has been announced, rather than having the opportunity to comment in advance. Non-doms were told in 2010 that there would be no further changes this parliament. This was to give certainty to foreigners seeking to invest in this country. Making changes without consultation in this way does not enhance the UK’s reputation as a place to do business with certainty. While the CIOT will always support efforts to clamp down on avoidance, this change will catch many commercial situations.’
Meanwhile, the ICAEW tax faculty team drily noted that: ‘HMRC seems to have a habit of slipping out bad news when it thinks people are on holiday’, adding: ‘The change of view means that the use of the foreign income and gains as collateral will be treated as a remittance as well as the servicing payments, a double tax charge. When the remittance basis rules were being discussed with HMRC in 2008 this particular point about the possibility of a double tax charge was raised and HMRC said its view that there was no double tax charge was based on an interpretation of the law and was not concessionary. To now call it a concession making it simple to change the position seems disingenuous.’
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