FT: US in tax clash with UK over non-doms

11 February 2008

The UK and US are at loggerheads over the imminent tax clampdown on non-domiciled foreigners living in the UK, which threatens to hit Americans hard by in effect forcing them to pay the £30,000 annual levy twice over.

 

The government's refusal to give way on the issue is exacerbating fears that the tax changes will drain talent from the City, damaging London's status as a financial services centre.

 

The US is lobbying hard behind the scenes to persuade the Treasury to change the wording of its draft legislation. The Americans want to ensure the £30,000 fee falls within the scope of a transatlantic treaty designed to avoid double taxation. As the proposals stand, the levy will almost certainly not be "creditable" under US rules taxing worldwide income, and so cannot be offset against US tax.

 

Richard LeBaron, chargé d'affaires for the US embassy in London, told the Financial Times: "The embassy has been consulting widely and hearing the concerns of American companies and taxpayers in the UK. We are communicating those concerns to HM Treasury and others in the UK government as part of our regular dialogue with them."

 

US banks in the City are spearheading efforts to persuade the chancellor to soften the effect of the new regime before it comes into effect in April. But the Treasury is resisting pressure to respond to the US concerns. An official said: "Whether the tax charge can be credited against tax paid in the US is a matter for the US authorities."

 

The standoff compounds the uncertainty over the precise effect of the tax clampdown.

 

The Treasury is still consulting on its proposals to charge foreigners living in Britain for more than seven years £30,000 a year if they wish to keep their foreign income out of the British tax net.

 

Details of how the regime will work will not be finalised until the Budget on March 12.

 

© Financial Times