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HMRC's non-dom tax on loans comes unstuck

The government has been gradually softening its pre-election position on non-doms since securing another term in office

21 October 2015

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HMRC has reversed its pre-election position on non-domiciled individual's (non-doms) ability to use assets held overseas as collateral to secure a loan brought into or used in the UK.

The government announced in August 2014 that 'concessional treatment for commercial loan arrangement' would be withdrawn, which would have led to retrospective tax charges on overseas gains used to finance investments in the UK.

The move is the latest in a recent line of policy reversals concerning non-doms, all of which have been designed with the intention of continuing to attract foreign high-net-worth individuals to the UK; the government recently chose not to tax non-doms' offshore assets, thus climbing down from another pre-election policy.

James Badcock, a partner and head of private client services at law firm Collyer Bristow, believes the government's new stance is to be welcomed.

'Taxpayers should not face additional charges based on periods when they have been acting in good faith and in accordance with HMRC guidance.'

He continued: 'For a time HMRC was seeking to levy additional tax from people who had followed its guidance accurately. Taxpayers have a legitimate expectation of consistency from HMRC and these types of changes make the UK less attractive to those considering moving here.'

The policy has become unstuck because some non-doms will find it 'impossible' to refinance their investments in the UK, the treasury has said.

HMRC said its statement: 'Discussions with representative bodies since the announcement have brought to light that for some loan arrangements, it may be difficult or impossible to unwind or replace the foreign income or gains used as collateral.'

 

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Tax & Wealth structuring