The Treasury have issued the much anticipated consultation document in relation to widespread changes to the taxation of non-UK domiciled individuals in the UK.

The policy aim states an intention to tax long term residents, regardless of their domicile, on their worldwide income and gains. Furthermore individuals who have a UK domicile of origin will be treated as being UK domiciled whenever they are in the UK, regardless of whether they have acquired a domicile of choice elsewhere.

The consultation period ends on 11 November 2015.

Below are the highlights:

Non-doms (non-domiciles) are split into 3 specific categories:

  1. Non-dom – without a UK domicile of origin
    • ‘15 year rule’ – becomes ‘deemed-dom’ and is taxed as a UK dom after 15 out of 20 tax years – from April 2017 onwards
    • Applies to Income Tax, Capital Gain Tax and Inheritance Tax, with no access to the remittance basis or overseas workday relief
    • Can break deemed-domicile after 6 consecutive tax years outside of the UK
    • The 15 year clock reset to zero if return to the UK after 6 consecutive tax years away
  2. Non-dom – not born in UK, but with a UK domicile of origin
    • Subject to the same 15 year rule as above
  3. Non-dom – born in UK, with UK domicile of origin
    • Regarded as UK domiciled whenever UK resident
    • Offshore trusts cease to be excluded property trusts whenever the settlor is present in the UK

Treatment of trusts

  • Intention to tax deemed-doms on benefits received from trusts
  • Protection for deemed-doms when trust created prior to becoming deemed-domiciled, as long as not receiving benefits
  • Tax charge arising on benefits will be on the taxable value of benefits, not the on the income and gains arising within the trust
  • No need for trustees to recreate the history of income and gains within the trust
  • Government considering taxing all non-doms on benefits received whilst in UK from offshore trusts

Further points

  • Deemed-doms can no longer claim the remittance basis on foreign pensions
  • Split years are included in the 15 year count
  • Inheritance Tax on worldwide assets after 15 years, not 17 as current rules stand
  • Children’s deemed-domicile position does not follow that of their parents, children have their own 15-year clock

A number of areas have not been clarified at this point

  • The £2,000 de-minimis limit – will taxpayers with less than £2,000 of offshore income and gains have the burden of reporting?
  • The review of Double Tax Agreements with countries such as India and Pakistan
  • The potential to align the 6 year departure rule where it relates to Inheritance Tax exposure of UK-doms with that of non-doms
  • The non-dom spousal election for Inheritance Tax

Although the new rules are due to come into force from 6 April 2017, non-doms should review their position now and seek the right advice.

Action points could include:

  • Review and confirm your own domicile status and the domicile status of family members
  • Make preparations for periods abroad – they will now need to be for 6 years to reset the 15 year clock
  • UK resident non-doms should consider establishing trust structures ahead of 6 April 2017
  • For individuals with trust structures already, review their terms and the assets held, it may be advantageous to ‘rebase’ or extract certain assets (e.g. homes or artwork)
  • If assets are owned via corporate structures consider introducing a trust into the structure
  • In marriages where one spouse is a non-dom and one is UK-dom – consider no gain/no loss spousal transfers and establishing family trusts via the non-dom spouse
  • Non-doms who will become deemed-dom on 6 April 2017 may wish to consider gifting to family members before that date.

The consultation paper is available to read here>>

For further information about the Non-Domiciles Consultation Paper please contact a member of the Tax team directly.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

Edwin Coe LLP is a Limited Liability Partnership, registered in England & Wales (No.OC326366). The Firm is authorised and regulated by the Solicitors Regulation Authority. A list of members of the LLP is available for inspection at our registered office address: 2 Stone Buildings, Lincoln’s Inn, London, WC2A 3TH. “Partner” denotes a member of the LLP or an employee or consultant with the equivalent standing.

Please also see a copy of our terms of use here in respect of our website which apply also to all of our blogs.

Latest Blogs See All

Share by: