Introduction

To my Jane

me gustaría ser un nido si fueras un pajarito	I’d like to be your nest, if you were a nestling
me gustaría ser una bufanda si fueras un cuello y tuvieras frío	I’d like to be your scarf, if you were a neck and felt cold
si fueras música yo sería un oído	If you were music I’d be an ear
si fueras agua yo sería un vaso	If you were water I’d be a glass
si fueras luz yo sería un ojo	If you were light I’d be an eye
si fueras pie yo sería un calcetín	If you were a foot I’d be a sock
si fueras el mar yo sería una playa	If you were the sea I’d be the beach
y si fueras todavía el mar yo sería un pez	And if you were still the sea, I’d be a fish
y nadaría por ti	And I’d swim in you
y si fueras el mar yo sería sal	And if you were the sea I’d be salt
y si yo fuera sal	And if I were salt
tú serías una lechuga	You’d be a lettuce
una palta o al menos un huevo frito	An avocado, or at least a fried egg
y si tú fueras un huevo frito	And if you were a fried egg
yo sería un pedazo de pan	I’d be a slice of bread
y si yo fuera un pedazo de pan	And if I were a slice of bread
tú serías mantequilla o mermelada	You’d be butter or jam
y si tú fueras mermelada	And if you were jam
yo sería el durazno de la mermelada	I’d be the fruit in the jam
y si yo fuera un durazno	If I were a peach
tú serías un árbol	You’d be a tree
y si tú fueras un árbol	And if you were a tree
yo sería tu savia y correría	I’d be your sap; I would flow
por tus brazos como sangre	Through your arms, like blood
y si yo fuera sangre	And if I were blood
viviría en tu corazón.	I would live in your heart.

Claudio Bertoni

Scope of this book

There are three themes to this book:

(1) Taxation of foreign domiciliaries

(2) Taxation of non-residents on UK assets

(3) Taxation of UK residents on foreign assets

To attempt to cover these topics comprehensively is ambitious, perhaps quixotic. This book is in danger of bursting, particularly because these territorial issues can only sensibly be discussed in a wider context. But one cannot address the first topic without the second and third: in taxation, as in life, everything is connected. Thus what started as a book on foreign domiciliaries has become a book which seeks to address all territorial limits to UK taxation, and extends to other topics, such as disclosure and compliance, which often arise in this context.

The year 2019/20 in review

OTS stated in 2017:

The UK tax code is widely cited as being the longest in the world”.

This claim had been made at least since 2010. In recent years Parliament added:

Finance Act(s)	Pages
2012	703 pages (a record)
2013	648 pages
2014	663 pages
2015	562 pages (2 Finance Acts)
2016	649 pages
2017	813 (a new record)
2018	196
2019	328
2020	186

The unusually short length of the 2020 finance bill is likely due to the December 2019 election.

In the same period, OTS has not achieved any perceptible improvement, at least in relation to the topics covered in this book.

It is easier to talk of simplification:

Our system remains too complicated ... We will therefore simplify the tax system.

The reader may think that satirists better identify the reality:

We will further complicate the UK tax system so that large companies can no longer find loopholes.

Scotland continues its fiscal drift from the UK, with Northern Ireland and Wales following.

The most important change of the year is the move from IT to CT on property income of non-resident companies.

FA 2020 introduced important changes; those closest to the themes of this book are:

• New IHT excluded property rules for gifts to trusts and transfers between trusts

• Revisions to CGT private residence relief

The Fifth Anti-Money Laundering Directive takes effect.

The courts have decided too many cases to list them all; of particular interest are Embiricos v HMRC on closure notices in domicile appeals; Fisher v HMRC and Rialas v HMRC on TOAA; HMRC v Hyrax Resourcing on avoidance; Jimenez (oao) R v First-tier Tribunal on territorial limitation.

The BEPS multilateral instrument has come into force and the number of DTAs which incorporate its terms gradually increases. OECD has noted, I think correctly:

International tax issues have never been as high on the political agenda as they are today.

The growth in complexity is matched by a decline in HMRC efficiency. The House of Lords Economic Affairs Committee issued an important report, recording:

in compliance and enquiry cases, the behaviour of some HMRC staff falls well below the standard set in the Charter. HMRC needs to have better systems in place to identify and address any problem behaviours as a matter of urgency.

The future

In 2021 the proposed Registration of Overseas Entities Act will set up a beneficial ownership register of overseas entities that own UK property.

Budget 2018 provided:

the government will publish a consultation on the taxation on trusts, to make the taxation of trusts simpler, fairer and more transparent.

A call for evidence (misdescribed as a consultation document) was published November 2018. It is not possible to guess what will emerge from the process of the review; or at least, studying this paper will not assist in the guesswork.

We face an extended period of change and uncertainty, in politics, economics, public health, law and taxation.

We will continue to live in fiscally exciting times.

Thanks ...and request for help

I am very grateful to my colleagues in chambers, especially Robert Venables QC and Philip Simpson QC, for discussions on many aspects of tax. Shaun Fu and Aditya Vora as research assistants resolved many puzzles. I owe a great debt to Jane Hunt and Ruth Shaw who work committedly on this text throughout the year.

Comments from readers and professional clients continue to be of the greatest value and interest to the author.

The pleasure in writing this book consists in the interest of the questions which it raises, and the success which it may have achieved in answering them. On the basis of what is known at 30 April 2020, it seeks to state the law for 2020/21.

James Kessler QC
Old Square Tax Chambers
15 Old Square		kessler@kessler.co.uk
Lincoln’s Inn		https://www.kessler.co.uk
WC2A 3UE

OBTAINING FURTHER ADVICE - AND DISCLAIMER

Further advice

If you want advice on which you are legally entitled to rely you can obtain it - but not from this work.

In particular, you may instruct the author to advise. I enjoy writing, but spend most of my time giving independent specialist professional advice in private client matters, especially areas covered in this work. For further details see https://www.kessler.co.uk. https://www.kessler.co.uk.

TFD Online

TFD Online is an online version of this book and more. It can be used:

(1) to search the text of this book or to access it online.

(2) to see if the book has been updated

(3) to correct or contribute to the book

TFD Online is moderated by Ross Birkbeck, a member of Tax Chambers, 15 Old Square, Lincoln’s Inn.

TFD Online is accessible on https://www.foreigndomiciliaries.co.uk. An authorisation code for a 3 week trial period is in the inside cover of this volume.

Disclaimer

The Professional Bodies issue the Professional Conduct in Relation to Taxation with a disclaimer:

While every care has been taken in the preparation of this guidance the PCRT Bodies do not undertake a duty of care or otherwise (?) for any loss or damage occasioned by reliance on this guidance. Practical guidance cannot and should no be taken to substitute appropriate legal advice.

When that appeared in 2011 it seemed extraordinary. But nowadays no professional body issues guidance without a disclaimer. Similarly, and a fortiori, the views expressed in this book are put forward for consideration only and are not to be relied upon. Neither the author nor the publisher accept responsibility for any loss to any person arising as a result of any action or omission in reliance on this work. But could anyone have thought that a claim might arise in absence of this disclaimer?

A note to the lay reader

This book is not intended as a self-help guide, and is addressed to tax practitioners. In earlier editions I said: “... but it is readable for a lay person.” I think that is still true, though the text is more daunting than when I first wrote those words, because the law has become much more complicated. However, initiation in these matters must often be by the taxpayer. If you wish to research this subject in depth, and so take more control of your own tax affairs, read on. But for implementation you will need to find professionals to advise you. Self-help guides extol “the benefit of bypassing expensive lawyers”; but the bypass may prove the more expensive route in the long run.

Edition history

1st 2001	10th 2011
2nd 2003	11th 2012
3rd 2004	12th 2013
4th 2005	13th 2014
5th 2006	14th 2015
6th 2007	15th 2016
7th 2008	16th 2017
8th 2009	17th 2018
9th 2010	18th 2019

This book was called Taxation of Foreign Domiciliaries for 9 editions; it changed to Taxation of Non-Residents and Foreign Domiciliaries in the 10^th edition.