THE budget contained a major climbdown on non-doms since the chancellor first outlined his plans in the autumn.

The government has dropped any suggestion that measures will be retrospective. It has also abandoned a proposal that nondoms should be forced to disclose details of all offshore trusts.

James Quarmby of law firm Thomas Eggar said: “It was the proposals on disclosure rules that was causing my clients most grief. This is a significant change.”

A second shift since the autumn involves UK land and property owned by a trust via a company.

Rose-tinted specs fail to offer hope

The obvious justification for Mr Darling’s relatively upbeat scenario is that the outlook is fraught with uncertainty

Background

• Darling's first Budget: the main points

• The Chancellor's speech in full

• Darlings first Budget: the reaction

• Chancellor hits the home budget as his debts soar

• Need to know: Budget 2008

The Chancellor delivers a modest Budget

As so often is the case, virtue, in terms of improving public finances, is not now, but at least a year away

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Under the original proposals, capital-gains tax (CGT) would have been payable if property were sold at a profit. Now, gains inside offshore trusts will escape the tax net, even if they relate to UK assets.

And significantly, the government is now calling the £30,000 levy on people who opt for non-dom status a tax: that means that it can be credited against tax liabilities elsewhere in the world.

The change is particularly useful for Americans, who faced the prospect of having to pay the nondom levy without any of it being taken into account in calculating their US tax bill.

Alistair Darling’s original proposals suggested that where a nondom had an offshore trust owning UK investments, profits on selling those assets would be subject to CGT if they were sold after the end of this tax year. The scheme gave an incentive for nondoms’ trusts to get rid of assets before April 5.

Now, profits will be taxable only if the gains come back into the hands of the non-dom in the UK.

Darling promised in his budget speech that there would be no further clampdown on non-doms’ tax status in this parliament or the next.

Lee Smythe, director of financial planning at Killik & Co, suggests nondoms use of “offshore investment bonds” to hold assets outside of the UK, as these do not give rise to income or gains until a “chargeable event” occurs – when you cash in the bond.

He said: “By making use of this type of plan nondoms could elect to be taxed on worldwide income and gains as they arise, rather than paying the £30,000 charge.”

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