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HMRC’s rules used by non-domicile to win court victory

01 April, 2010

It is normally not a very good idea to take on the taxman, as even if a few points are scored, one generally finds oneself losing in the long run.  However, just recently a non-domicile (name remaining unpublished for security reasons) won its case by using the HMRC’s own rulebook and secured an exemption from tax on offshore profits. They successfully argued that they were entitled to the one get-out clause to Section 739 of British tax law. 

Even though the HMRC argued that the company where the profits were deposited was opaque, the non-domicile countered that even if the company were opaque, remittance rules superseded this argument. The remittance rules state that as long as non-domiciles don’t bring overseas profits onshore they’re not liable for tax in the UK.

However as from the 6 April 2010 the loophole that allowed non-domiciles to sidestep the remittance basis rules has been closed.

Budget notes explain: “To remove any such uncertainty and to remove the potential for abuse, the legislation will make clear that a ‘relevant person’ include such companies”.

This indicates that the HMRC recognized that non-domiciles had a way out, but it is taking steps to close that gap and make sure that there is no abuse of the law.

About Trafalgar

The Trafalgar Umbrella Company is a leading UK managed service company, with a reputation built on trust and respect. We have been providing UK contractors with accounting solutions for over 15 years and offer a contractor umbrella solution that is fully compliant with HMRC regulations.

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