HMRC plans to write directly to all non-domiciled UK taxpayers - who claim the remittance basis of taxation in the UK in an attempt to increase compliance - have been criticised by ICAEW, which says this approach risks undermining the role of agents.
Individuals who are UK resident but non-UK domiciled and who file their tax returns on this basis, can elect for the remittance basis of taxation to apply. For a limited period of time after their arrival in the UK this means that their earnings for non-UK duties are only taxed in the UK if remitted to the UK. In addition, non-UK sources of investment income may only be taxed in the UK if remitted.
Last week HMRC announced it would be launching a 'nudge' campaign after research suggested that some non-doms do not fully appreciate the various ways in which remittances occur. It said it would shortly be sending a letter to those taxpayers who had paid the remittance basis charge (RBC) in 2011/12 to educate them about what was, and what was not, a remittance. HMRC said it would contact other taxpayers claiming the remittance basis later in 2013.
The letter included a help-sheet detailing various types of remittances, clarifying what was or was not a remittance, with examples including assets brought to the UK, services provided in the UK, and the use of credit cards and offshore loans
.It invited individuals to contact HMRC or their agents if, after reviewing the examples provided, they believe there may be additional income to be declared. They should then seek advice on the actions that should be taken to remedy the position.
However, ICAEW's tax faculty team has expressed a number of concerns over this approach, saying that the timing of the announcement of letter gave agents no time to react or brief clients.
Its reading of the factsheet suggested some of the information could be misleading by, for example, failing to make clear details of the exemption for personal chattels for assets bought abroad with foreign income and brought into the UK. The example whereby a non-dom made a gift of foreign income to an adult child who lives abroad and that person then gives some of the funds to a minor who spends the money in the UK was confusing.
ICAEW also questioned HMRC's decision to approach taxpayers directly when those taxpayers were likely to have appointed agents to deal with HMRC. The institute said this was a particular worry since HMRC's letter suggested that the taxpayer may not have properly understood the tax system and may have made errors, a suggestion which cast doubt on the competence of their adviser.
HMRC is understood to have suspended despatch of further letters and a working party is being set up to consider how best to deal with future situations when HMRC wants to contact the taxpayer direcly. ICAEW's tax faculty team's briefing note stated that 'this is a sensitive area and on this occasion it was not handled well by HMRC'.
