Remittances - living as husband and wife

With the last week being occupied by an unpicking of the bones of the draft proposed legislation on the taxation of non-domiciliaires, and a scrambling around to advise on the pre 5 April actions merited by clients, we cannot find the enthusiasm to write about what is now clearly a veiled onslaught against non UK resident trusts (to follow the embarassment of the FA2006 changes from which clearly the government has learned nothing).

Rather, and in the context of the re-write of the remittance rules and, more precisely, the attempts to counter the alienation of foreign income and gains, we could not help but be dismayed and amused, in equal measure, at the proposed new section 809H(5) for insertion into the Income Tax Act 2007.

In an effort to stop one party alienating non UK income by gifting the income to a third party who then brings the funds into the UK as their own non-taxable capital, we now face the extension of the connected persons rules to include persons that would hitherto not be treated as connected; namely co-habiting couples (whether of a different, or the same, sex).

Whilst this may, when coming from one direction (being that of a feeble minded modern politican) seem like good sense and, from another direction (being that of all people who have lost faith in feeble minded modern politicans), seem like nothing more than yet another confused, cack handed policy statement over the institution of marriage (or civil partnership) we will, if the law is enacted in its current form, have a new concept in our tax legislation.

This being the notion that ... "a man and woman living together as husband and wife are treated as if they were married to each other". (Similarly... "two people of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other.")

But, as best we can establish, such expressions are not to be found in any extant law and have, therefore, never been the subject of dispute and the need for interpretation by the judiciary.

Which brings us to the not wholly unproposterous situation where, for reasons which may, conceivably, involve tax planning but which are far more likely just to involve the way people choose to live their lives, the nature of a couple's relationship falls to be scrutinised by the judiciary in order to determine the extent of a UK tax liability.

Might it not, therefore, be too long before we have one of the country's most capable advocates arguing before the Law Lords that, whilst his clients are, indeed, a man and woman living together, they are not connected persons under the new remittance rules because their relationship is not one of husband and wife. What might be the evidence in support of this assertion ? Perhaps, he remembers her birthday, and she shaves her legs ?