There has been much discussion in the newspapers over recent months on the possibility that the rules affecting the taxation of those individuals resident in the UK, but domiciled elsewhere, may be changed. How realistic is this prospect and how may changes in the legislation affect the use of trusts already set up?
To summarise briefly the present advantages to non-domiciled individuals, their income and gains which arise outside the UK are only taxed at the point funds are remitted to the UK (the "remittance basis"). This rule allows income and gains left outside the UK to remain free of tax. The benefits of these rules can be enhanced by the use of non-resident trusts.
Following the 2003 Budget the government issued a background paper discussing the taxation issues surrounding residency and domicile, inviting comments. The background paper, in the main, consisted of a rehearsal of the rules covering residence in the UK, and indicated that any changes to the existing rules
