Clause 216 - Ordinary residence

Finance Bill – in a Public Bill Committee am 4:45 pm ar 18 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Sir David Amess Sir David Amess Ceidwadwyr, Southend West

With this it will be convenient to discuss the following:

Government amendments 136 to 140.

That schedule 44 be the Forty-fourth schedule to the Bill.

Photo of David Gauke David Gauke The Exchequer Secretary

Clause 216 introduces schedule 44, which abolishes the concept of ordinary residence for most tax purposes. More than 100 provisions in primary legislation that use the concept of ordinary residence, sometimes in conjunction with residence, will in future refer only to residence, which represents a significant and welcome simplification of the tax code.

Previously, people coming to the UK had to think about three things that affect taxation: residence, ordinary residence and domicile. With the reforms, they will have to consider only residence and domicile. The main tax relief available to individuals who are not ordinarily resident, which allows overseas earnings not remitted to the UK to stay out of the UK tax net, will be retained and simplified. That relief, known as overseas workday relief, will be made available to all non-domiciled arrivers who come to the UK having not been UK-resident in the previous three years.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I might be able to save the Minister some time, because we have only one question: why will references to ordinary residence remain in some statutory instruments and other pieces of statute? If he addresses that point, we will be satisfied.

Photo of David Gauke David Gauke The Exchequer Secretary

I am delighted that the hon. Gentleman will be satisfied with that. I stood to address the various amendments, but if he is satisfied with the measures—I know that he and his party have carefully read the measures and the amendments that have been tabled—I am happy to bring my comments to a conclusion.

There are a number of places remaining in primary tax legislation where the term “ordinary residence” is used in a very specialist sense, for example when referring to ordinary residence in Scotland or Northern Ireland, rather than in the UK as a whole. We have made a conscious decision to leave those references to ordinary residence in tax legislation as we do not want to change how those provisions are applied.

Given the enthusiasm for the clause, the amendments and the schedule, I am inclined to conclude that the abolition of ordinary residence, which is a vague, subjective and complicated tax status, is welcome. The main relief linked to the status will be replaced with a relief that is far more straightforward and certain. This package of changes has been warmly welcomed by industry commentators. The relief will now be available to all non-domiciled employees arriving in the UK who have not been UK-resident for the previous three tax years, regardless of the length of time they intend to stay here.  The relief will be available for the year in which the employee becomes UK-resident plus the two following tax years.

Question put and agreed to.

Clause 216 accordingly ordered to stand part of the Bill.