HM Revenue and Customs (HMRC) has announced that it will not be seeking additional tax from those non-domiciled individuals who historically took out loans secured against foreign assets, says law firm Collyer Bristow.
Welcoming the decision, the firm said HMRC’s controversial previous position would have seen significant unexpected additional tax levied on individuals who had followed explicit HMRC guidance.
According to the firm, in the past eighteen months, HMRC has twice changed its approach to the tax treatment of loans taken out by non-domiciled taxpayers who use foreign assets as collateral:
- Until August 2014, the assets on which such a loan was secured were not taxed, on the grounds that tax was already being paid on the remittance(s) used to repay the loan;
- In August 2014, HMRC decided that those taking out such loans would be liable to pay tax on the assets on the same basis as if they were remitting the assets to the UK from overseas; and
- Last week HMRC reversed its position that the tax charges could be backdated to previous tax years but maintained that the use of offshore assets to secure such loans would be taxable going forwards.
James Badcock, Partner and Head of Private Client Services at Collyer Bristow, said: “The most recent reversal of HMRC’s position in respect of existing arrangements is welcome. Taxpayers should not face additional charges based on periods when they have been acting in good faith and in accordance with HMRC guidance.”
“For a time HMRC was seeking to levy additional tax from people who had followed its guidance accurately. Taxpayers have a legitimate expectation of consistency from HMRC and these types of changes make the UK less attractive to those considering moving here.”
Badcock added that, while HMRC’s final interpretation of the rules is not unreasonable, the Department’s inconsistency “highlights the difficulty taxpayers have in understanding their position, and [it] chips away the UK’s position as a welcoming jurisdiction for high net worth individuals.”
Source: tax-news.com
