Monaco report estimated ‘lost revenue’ at £1bn based on comparison with US system
An editorial in The Times newspaper questioned the UK’s residence basis of taxation of individuals after an investigation revealed that 533 directors of UK companies have registered addresses in Monaco and control 1,302 UK companies.
In a front-page report under the headline ‘The Monaco problem’, yesterday’s Times said ‘a wealthy elite reaps the benefits of British assets and connections, but escapes the levies that apply to other citizens’.
The report was presented as an extension of the ‘Secrets of the tax avoiders’ series that the paper ran during the summer, and it declared that ‘more than 2,000 Britons in Monaco are costing the UK economy £1bn a year in lost tax revenue’.
But the same report noted that the £1bn estimate was an HMRC estimate of the additional tax that would be payable if the UK adopted the US system of taxation.
The worldwide income of US citizens is subject to US tax regardless of where they live. Broadly speaking, an individual who is not resident in the UK is not liable to UK tax on non-UK income and gains.
The editorial said the number of British tax exiles in Monaco raised the question whether British citizens should pay tax on their worldwide income, wherever they are in the world: ‘The principle is that if you are to enjoy the rights and privileges of British citizenship, not least the promise of protection from the UK Armed Forces, then you should make your contribution to the country.’
Today’s letters page carried a mixed reaction to the report. One correspondent said the paper had confused emigration with tax avoidance. The US alone taxes on the basis of citizenship, he said, ‘no doubt because it has the muscle to do so’. Another said it was ‘ridiculous’ to suggest that someone who is legitimately tax resident in Monaco, but has British business or other interests, is ‘somehow avoiding tax’.
Fay Schlesinger, the Times reporter, said in an online video that HM Treasury did not want to punish those who genuinely want to move abroad and have a ‘definite break’ with Britain, but it did want to ‘crack down on those who play the system … who keep multiple assets and economic interests in Britain while flitting back and forth between the UK and say, Monaco’.
Critics had suggested that the statutory residence test to be introduced in the UK next year ‘was not going to solve a problem like Monaco’, she said.
The Chartered Institute of Taxation said last week that it was ‘encouraged’ by progress with draft legislation on the statutory residence test. But it highlighted a number of areas that still needed work.
John Barnett, Chairman of the CIOT’s Capital Gains Tax and Investment Income Sub-Committee, said some key concepts and expressions were not explained in the draft legislation. ‘Concepts such as “home”, “accommodation” and “work” clearly need to be sharpened up before they can become enacted and many other areas will need guidance outside the legislation. The target has to be that the vast majority of people temporarily in or out of the UK can self-assess their residence and therefore their tax and be certain they have reached the correct answer,’ he said.
The ICAEW Tax Faculty said earlier this week that the draft legislation was ‘long and complicated’ and needed to be simplified.
Monaco report estimated ‘lost revenue’ at £1bn based on comparison with US system
An editorial in The Times newspaper questioned the UK’s residence basis of taxation of individuals after an investigation revealed that 533 directors of UK companies have registered addresses in Monaco and control 1,302 UK companies.
In a front-page report under the headline ‘The Monaco problem’, yesterday’s Times said ‘a wealthy elite reaps the benefits of British assets and connections, but escapes the levies that apply to other citizens’.
The report was presented as an extension of the ‘Secrets of the tax avoiders’ series that the paper ran during the summer, and it declared that ‘more than 2,000 Britons in Monaco are costing the UK economy £1bn a year in lost tax revenue’.
But the same report noted that the £1bn estimate was an HMRC estimate of the additional tax that would be payable if the UK adopted the US system of taxation.
The worldwide income of US citizens is subject to US tax regardless of where they live. Broadly speaking, an individual who is not resident in the UK is not liable to UK tax on non-UK income and gains.
The editorial said the number of British tax exiles in Monaco raised the question whether British citizens should pay tax on their worldwide income, wherever they are in the world: ‘The principle is that if you are to enjoy the rights and privileges of British citizenship, not least the promise of protection from the UK Armed Forces, then you should make your contribution to the country.’
Today’s letters page carried a mixed reaction to the report. One correspondent said the paper had confused emigration with tax avoidance. The US alone taxes on the basis of citizenship, he said, ‘no doubt because it has the muscle to do so’. Another said it was ‘ridiculous’ to suggest that someone who is legitimately tax resident in Monaco, but has British business or other interests, is ‘somehow avoiding tax’.
Fay Schlesinger, the Times reporter, said in an online video that HM Treasury did not want to punish those who genuinely want to move abroad and have a ‘definite break’ with Britain, but it did want to ‘crack down on those who play the system … who keep multiple assets and economic interests in Britain while flitting back and forth between the UK and say, Monaco’.
Critics had suggested that the statutory residence test to be introduced in the UK next year ‘was not going to solve a problem like Monaco’, she said.
The Chartered Institute of Taxation said last week that it was ‘encouraged’ by progress with draft legislation on the statutory residence test. But it highlighted a number of areas that still needed work.
John Barnett, Chairman of the CIOT’s Capital Gains Tax and Investment Income Sub-Committee, said some key concepts and expressions were not explained in the draft legislation. ‘Concepts such as “home”, “accommodation” and “work” clearly need to be sharpened up before they can become enacted and many other areas will need guidance outside the legislation. The target has to be that the vast majority of people temporarily in or out of the UK can self-assess their residence and therefore their tax and be certain they have reached the correct answer,’ he said.
The ICAEW Tax Faculty said earlier this week that the draft legislation was ‘long and complicated’ and needed to be simplified.
