Breaking news for non UK domiciliaries

The changes to the taxation of non UK domiciliaries which were to apply from 6 April 2017, have been dropped from the Finance Bill due to a shortage of Parliamentary time in advance of the General Election. When the clauses were dropped, it was announced that they will be brought forward in a Finance Bill as soon as is practicable after the election. It is not clear whether this will be through a further Finance Bill after the election (and potentially backdated in effect to 6 April 2017) or postponed to 6 April 2018.

This could have serious implications for anyone who undertook restructuring prior to the introduction of the new rules, particularly if they are not reintroduced in their current form.

The following changes have been dropped:
  • the new rule that would deem an individual to be domiciled in the UK for income tax, capital gains tax and inheritance tax after 15 out of 20 years of UK residence;
  • the rule that would treat UK born domiciliaries who had acquired a domicile of choice outside the UK as being UK domiciled on taking up UK residence again;
  • the changes to the taxation of offshore trusts;
  • the introduction of inheritance tax charges on UK residential property held through offshore structures by non UK domiciliaries.
It also means that the following reliefs will not be introduced:
  • rebasing of assets held on 6 April 2017 for individuals becoming deemed UK domiciled under the 15/20 rule on 6 April 2017;
  • cleansing of mixed funds;
  • relaxation of business investment relief rules.
No planning should be undertaken until the election is over and the new Government indicates their intentions with respect to these proposed changes. It remains to be seen whether the delay offers another opportunity for restructuring for anyone who failed to do so before 6 April 2017.

In particular, anyone anticipating selling assets post 6 April 2017 to take advantage of the rebasing of assets should defer any sales until the position is clearer.

We will issue a further update shortly, setting out the implications of the changes in more detail.

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Priya Shah


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