Zero tolerance - offshore bank accounts

Accountancy Age (18 July) reports those planning to claim non-domiciled status in order to avoid the offshore bank account clampdown will face an uphill struggle.

Such individuals may well have an uphill struggle in some respects, but an individual's domicile is a matter of fact and not something to be claimed. Further, domicile is a common law concept falling to determined by the courts, when necessary, and not by the Revenue, whose jurisdiction extends only to the consideration of an individual's domicile in the context of UK tax assessment.

Commentary generally states that the number of non-domiciled "claims" made to the Revenue is increasing dramatically (in percentage terms, at least), and suggests that this reflects people looking to avoid offshore liabilities through spurious means. This is, we regret, most probably correct to a large extent, but there remains the fact that domicile is a very complex doctrine, understood only by the minority and which is, for the majority of the population, an entirely unknown concept until they have reason to encounter the subject. For many, this might only be when a family member dies; being when succession laws or the validity of a financial dependency claim under the 1975 Act need to be considered.

For others, it might be simply because they had cause to read about domicile in the national press and have come to gain at least an introductory grasp of a subject which they were hitherto completely unaware. Given that the UK is a country largely comprised of immigrant populations, including many from the post war generations, one does wonder just how many non-UK domiciliaries reside in the UK and do not even know it. Doubtless, whatever that number is, the domicile status of many will have no bearing whatsoever on the level of UK tax they pay but, given the propensity for hard work and business success displayed by some relatively recent immigrants, one does wonder whether the recent estimates of 200,000 people claiming the tax treatment afforded to non UK domiciliaries is on the low side compared to the number who would lawfully be entitled to claim the tax benefits of being a non-dom.

So, for the article to quote a professional as saying "it is very hard to argue that you are not domiciled [within the UK] if you have UK nationality and have spent many years here" is somewhat worrying, and none the less so when it is attributed to a Big Four head of tax policy. There is nothing to say that a domicile within the UK cannot be acquired in a very short time (be it on birth, or, in years gone by, upon marriage, and possibly when the individual had not even so much as set foot in the UK) or that a domicile in the UK may not be acquired even after decades spent living in the UK (as Bullock and Buswell demonstrate).

One should add here, in the interests of fairness, that unless Bill Dodswell of Deloitte is an utter twerp, his above quote and the others which follow in the same article, has been misused by Accountancy Age, because his quotes are in the context of a Gaines-Cooper attempted abandonment of a domicile within in the UK. In the context of avoiding the offshore bank account etc., purge, any assertion of abandonment would be pointless given that an abandonment would be achievable only by emigration from the UK and, therefore, the attainment of non UK residency status also.

Of more concern is a Revenue spokesman saying that "where we suddenly see non-domiciled applications from people in their forties, fifties and sixties who have never claimed to be non-doms before, we are going to take a very hard look at them and challenge applications in the civil courts if we have to". Such a statement not only lacks intellectual substance, but also runs the risk of being interpreted as a disingenuous effort to dissuade people from asserting what, in some instances at least, will be their lawful rights. So much, then, for the Revenue being an educating body.

In the context of the offshore bank account clampdown, where we do feel individuals will face an uphill, if not insurmountable, struggle is not with the assertion of their domicile status per se, but in placing a reliance on such status to protect them from assessment for tax years earlier than the most recent six. With a claim under s.65 ICTA (s.831 ITTOIA post 5 April 2005) for the remittance basis to apply to foreign income, such as bank interest, rents and dividends, being required within 5 years and 10 months of the end of the relevant tax year, non-UK domicile status will be of no use for lawfully avoiding income tax on non UK income arising prior to 6 April 2001. Better news applies to non-remitted capital gains, for which no claim is required.