Consultation from the Treasury: Restricting non-residents’ entitlement to the UK personal allowance

The Treasury has released a consultation document as to whether non-UK residents should be restricted from entitlement to the UK personal allowance and how this might be implemented. Comments are required by 9thOctober 2014.

In the UK, most non-residents with taxable income arising in the UK currently benefit from a generous personal allowance. This differs from a large number of countries, including most of the EU, Australia, Canada and the United States, where this benefit is restricted to those who are resident for tax purposes.

The consultation also aims to collate opinions on the ‘percentage test’ as a possible model for restricting entitlement to the UK personal allowance for non-residents should  the Government  continue with the proposed change to the existing policy. The percentage test would mean non-residents would have their income measured, so those with the strongest economic connections to the UK would be identified. This consultation is part of stage 1 of the Government’s Tax Policy Consultation Framework.