A person's 'domicile' is their permanent home, and while this is a concept of general law, it has long been an important consideration in an individual's liability to pay tax in the UK. "Non-domiciles" who live in the UK have been entitled to be taxed under the "remittance basis", where any overseas income or gains is only subject to UK tax if remitted to this country. In the Summer 2015 Budget the Government announced a number of major changes to non-domicile taxation which are to take effect from April 2017. This paper discusses the background to these proposals and the current debate as to their impact.Jump to full report >>
The UK tax system has two main concepts that determine someone’s liability to direct taxes: residence and domicile. ‘Residence’ refers to someone’s physical location during the tax year, while ‘domicile’ refers to the legal jurisdiction with which someone, wherever they are living, has a primary connection – broadly speaking, their permanent home.
Generally individuals who are UK-resident are taxed on the arising basis of taxation. The arising basis of taxation means that all an individual’s worldwide income and gains will be taxable in the UK. If an individual is a UK-resident but is not domiciled in the UK, they may choose to be taxed on the remittance basis of taxation.
If someone in this position chooses to claim the remittance basis for a tax year, they will pay UK tax on:
Since April 2008, an individual who is a non-domiciled UK-resident taxpayer with a foreign income of £2,000 or more and/or brings that money into the UK, can choose whether to be taxed on an ‘arising’ or ‘remittance’ basis. Those individuals claiming remittance basis on their self-assessment return may be liable for an annual charge - the remittance basis charge - depending on the length of time they have been a UK-resident.
There are currently 3 different charge levels:
In August 2017 HMRC published a statistical survey of UK non-domicile taxpayers. In 2014/15 there were 121,300 non-domiciled UK taxpayers, paying a total of £9.3 billion in income tax, NICs and capital gains tax. Of these, 54,600 were UK-residence and were taxed on the remittance basis.
Of those non-domiciles taxed on the remittance basis, 5,100 individuals were liable to pay the remittance basis charge in 2014-15. This group paid £1,393m in income tax, £304m in NICs, £129m in capital gains tax, and £226m in remittance basis charges.
In the Summer 2015 Budget the then Chancellor George Osborne announced a series of reforms to the taxation of non-domiciles, including the abolition of permanent ‘non-dom’ status, to take effect from April 2017. It was estimated that these reforms would raise about £400m a year from 2018/19 to 2021/22.
Following extensive consultation, legislation to give effect to these measures was included in the Finance Bill 2017-19. Provision was also included in the Bill to change the rules for the Business Investment Relief (BIR) scheme from April 2017 “to make it easier for non-domiciled individuals who are taxed on the remittance basis to bring offshore money into the UK for the purpose of investing in UK businesses.” There have been some concerns as to the Government’s case for encouraging the take-up of this relief, although the changes to BIR are not anticipated as having any substantive Exchequer cost. Following consideration by the House, these provisions now form s15 (BIR) and ss29-33 (domicile reforms) of the Finance (No.2) Act 2017.
 For further details see, HMRC, Residence, domicile and the remittance basis (RDR1), January 2018
 HMRC, Statistics on non-domiciled taxpayers in the UK, August 2017. Figures for subsequent years are intended for publication in the annual update made in July each year. (PQ136776, 27 April 2018).
 Non-domicile taxation: Business Investment Relief: tax information & impact note, 5 December 2016. See also, PQ55513, 6 December 2016
 For a commentary on these measures see, “The reforms to the taxation of non-UK domiciliaries”, Tax Journal, 6 October 2017.
Commons Briefing papers CBP-8099
Author: Antony Seely