As of April, all non-domiciled workers
in the UK for more than seven years will have to pay an annual charge in return
for keeping their status, which allows them to avoid paying UK tax on their
overseas earnings. US workers pay tax on their worldwide income and may end up
paying tax twice, unless a concession is granted.
However, the scheme has come under
fire from many quarters, with some warning that its sudden introduction will
erode faith in the stability of the British tax system.
The Treasury will also relax its
rules about who is declared a resident for tax purposes. It had threatened
that days of arrival and departure in the United Kingdom will count towards the
annual 90-day limit, over which people qualify as residents, meaning an
overnight stay would count as two days. However, it will change the
definition so that a stay past midnight will count as only one day, adding that
special concessions will be arranged for passengers passing through the UK.
The overall cost of the non-dom
concessions is thought to be worth £50m out of the £550m it is expected to
A spokesman from ClarisGlobal, which
advises wealthy clients on their corporate and personal tax affairs, said: "This
is unacceptable last-minute shuffling, an ill-conceived law resulting in a net
loss to the financial services industry."
"Many of our clients - Americans and
continental Europeans - have consulted us over the past two weeks to find out
what steps to take to become non-resident. Frankly, it will take more than a
last minute rethink to change their minds."
He added: "It is unacceptable to
introduce complex legislation at such short notice. This should have been
laid out over at least a year".
Switzerland's cantons are targeting
key groups of high earning non-domiciled executives in the UK to exploit the
London government's planned tax crackdown on wealthy foreigners.
Malta too is receiving welcome
attention with its favourable remittance based tax residence schemes.
Malta's attractiveness as a financial centre has soared following the
Mediterranean Island's adhesion to the European Union in 2004. This stands
to win for Malta a fair share of London's exodus of non-doms following the
Malta's popularity with rich
foreigners stems from its good infrastructure and high-quality Mediterranean yet
European lifestyle. Malta boasts a UK-based legal and financial services
framework, the availability of top quality banking, legal and financial service
providers and favourable residence schemes that impose no minimum stay
ClarisGlobal's subsidiary in
Valletta, Malta, reported increased interest from UK professional advisers
examining options for clients. "We have received more inquiries from such
intermediaries, especially as further details of the planned crackdown have
emerged in the past three weeks," said Dr Priscilla Mifsud Parker of
Claris Trustees & Fiduciaries Ltd in Malta.
"There has been a marked increase in
inquiries," said Dr Jean-Philippe Chetcuti, tax partner at
Cauchi Advocates, Malta's leading legal practice for private clients.
"London firms are getting nervous calls from their clients, and they're
contacting people like us."
The greatest interest has come from
wealthy Europeans, resident but not domiciled in the UK, who would have the
least difficulty gaining exclusive
permits in Malta and Switzerland.