Gabriel Rozenberg and Suzy Jagger
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Wealthy Americans who claim nondomicile status in Britain have complained to
the Government that they will be unfairly singled out under its plans to
impose a new tax on foreign workers.
Proposals for a £30,000 charge on nondomiciled residents (or so-called
nondoms), outlined in a Treasury consultation paper last week, have prompted
an angry response from Americans.
The US Embassy has met British representatives to outline the US nondoms’
concerns that they will be unfairly charged. The Americans also argue that
they may be forced to complete two separate tax returns, creating a headache
for accountants.
But the Treasury has hit back, saying its proposals are fair and that any
fault lies with the US tax system.
The new charge was outlined by Alistair Darling, the Chancellor, in his
PreBudget Report in October.
It would be paid annually by anyone who has claimed nondom status for seven
out of the past ten years, and is due to begin in April.
The aim is to redress the unfair system under which foreign workers, who pay
no tax to their home country while working in Britain, can also exempt
themselves from tax on their overseas earnings.
But unlike almost every other country, the US imposes taxes on its citizens
even when they are working abroad. Americans can usually offset British
taxes against their US bill.
But the US Embassy has told the Treasury that the proposed charge cannot be
offset, because it has no equivalent in the US tax code. A spokesman for the
US Embassy said: “The US Government is studying the potential impact on
American citizens of the proposed tax changes in the recently released
consultation paper issued by HM Treasury.
“We have heard concerns raised by the American community in the UK about this
and have, and will continue to, pass on those concerns to HM Government
officials in our meetings with them.”
Americans who choose to end their nondom status will not have to pay the
charge, but will face the hassle of filling in tax returns for both
jurisdictions. A Treasury official confirmed that the embassy had explained
how the proposals would work for US citizens, who make up a large proportion
of the estimated 110,000 nondoms in Britain.
But he said: “It is quite right that people who have made their home in the UK
should make a fair contribution to the UK. The US charges people on their
worldwide income, as opposed to by residence, which is what most other
countries do. We cannot change that.”
The US Treasury and the US Internal Revenue Service declined to comment.
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