Changes to the taxation of non-domiciled individuals

The UK Government announced its intention to introduce changes in the tax treatment of non-UK domiciliaries (non-doms) in the Summer Budget of 2015. A process of consultation on those changes has been ongoing. We have been provided with some draft legislation on the new definition of a non-UK domicile, but the details of some of the reforms had been withheld until the publication of a consultation document that was issued on 19 August 2016.

There are still some areas where more information is required, and the details are not finalised, but we do, at last, have a better sense of what the post 6 April 2017 regime will look like.

There has been some movement from the last consultation position that is helpful, but the changes to the proposals for the treatment of offshore trusts is not as beneficial as initially thought.

The changes include:
  • a new concept of 'deemed UK domicile' for those who have been UK resident for more than 15 out of the previous 20 years, which applies to all direct taxes;
  • transitional provisions which allow a tax-free rebasing of foreign assets in certain circumstances, as well as a limited ability to unravel historic funds held overseas which could otherwise not be remitted to the UK without a tax charge;
  • changing the treatment of offshore structures, such as trusts settled by an overseas company, where held by deemed UK domiciliaries;
  • people who were born in the UK with a UK domicile of origin and who acquired a non-UK domicile after leaving the UK will be treated as UK domiciled if they return to the UK;
  • subjecting UK residential property to inheritance tax where it is held through offshore structures, even where the beneficial owner is not resident in the UK.
It is understood that further changes are due to be announced. The next likely update can be expected on 5 December 2016, on publication of the draft 2017 Finance Bill. However, the rules may still then be subject to change and this will leave affected individuals and structures very little time to plan what action to take before 5 April 2017.

For more information about how Moore Stephens can help you, please contact Simon Baylis.

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