'Gulf clause' brings joy to the jet set: Tax threat to visitors with UK property removed

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The Independent Online
THEY are calling it the 'Gulf clause', though to the Inland Revenue it is simply the proposed 'Temporary residents in the UK: available accommodation' provision, writes Gail Counsell.

Either way it is one aspect of the Budget that may prompt some of Britain's richest property vendors to send a billet doux to the Chancellor.

The planned change will scrap the rule under which anyone with property in the UK that is 'available for their use' is automatically designated a UK resident. The rule means - technically at least - that they are obliged to pay tax on any income they make in Britain even if they spend most of their time living elsewhere.

For most non-residents this is not a big problem. If they are resident in countries that have double tax treaties with the UK, their second home here will not count anyway.

For those living in countries with which the UK does not have such a treaty - primarily the Gulf states and South America - or for those who do not want to make use of a double tax treaty, which allows both sets of tax authorities to communicate with each other, it is a bit of a headache, however.

Many very rich Middle Easterners and others keep large sums of money on deposit with City of London banks.

This in effect prevents them from owning, renting or in any way having property 'available for their use' in this country - or at least it does so without putting them to considerable inconvenience. One sheikh was apparently accidentally caught because he had a suite on standby at the Dorchester hotel.

Hence the Chancellor's decision to change the rules. As one accountant - who insisted on remaining anonymous - put it: 'This is to allow the phenomenally rich to pop into the UK to do their shopping without having to pay tax on their bank deposits. It was probably the Bank of England's idea. It's all part of keeping the City competitive.'

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