HM Revenue & Customs has announced that there will be no retrospection on the offshore trusts tax hit that non-domiciliaries will face as part of the current Government reforms.
The Conservatives have branded the move as a major U-turn as draft legislation which was published in January stated that historical gains within offshore trusts would face the new tax.
The draft legislation proposed that non-doms who have lived in the UK for seven years or more will be unable to claim a capital gains tax exemption on the disposal of UK assets in their offshore trust.
Industry experts had warned that these proposals would be applied retrospectively but HM Revenue & Customs has now confirmed that this will not be the case.
HMRC acting chairman Dave Hartnett has sent a letter to tax advisers this week clarifying the Government’s position.
The letter says: “There will be no retrospection in the treatment of trusts and the tax changes will not apply to gains accrued or realised prior to the changes coming into effect.”
The letter clarifies that non-doms will not have to make additional disclosures about their income and gains arising abroad, or nature of offshore trusts, which some had feared.
It also states that money which is brought into the UK to pay the new £30,000 annual flat-rate charge will not itself be taxable and HM Revenue & Customs will continue to discuss with the American authorities how this flat-rate charge could be credited against US tax.
The changes are scheduled to take effect from the end of the tax year on April 5.