15 September 2017 by

Non-Domicile Tax Changes backdated to 6th April 2017 – are you caught?

The publication of the Government’s second Finance Bill last week confirmed that the changes previously announced this year regarding the definition and tax treatment of non-doms will now take place and be back dated to the 6th April 2017.

We set out below the new tests to see whether you are still in fact a non-dom and, if you are, consider some of the changes that might impact upon your tax liabilities.

Are you a Non-Dom?  – The 15/20 Test

If you have been a resident in the UK for 15 out of the past 20 years you will now be deemed UK domiciled for all UK taxes and be liable to pay income tax and capital gains tax in full.  The previous option of claiming a “remittance” where you were non UK domiciled but UK resident for 17 of the previous 20 tax years is no longer available.

The Bill also confirms that individuals born in the UK, with a UK domicile of origin, but who have left the UK and obtained a domicile of choice elsewhere will be regarded as UK domiciled whenever they are living in the UK and will be taxed on their worldwide income and gains.

IHT –  UK Residential Properties

UK residential properties owned by non-domiciled individuals through offshore structures (such as companies, partnerships or trusts) may now be subject to UK Inheritance Tax (IHT), if for example, there is a death of the offshore shareholder or an exit of assets from offshore trusts.  Certain loans, used to purchase UK residential property interests, may also now be brought within the scope of IHT.

Capital Gains Tax (CGT)

The new rules apply only to individuals who becomes UK deemed domiciled from 6th April 2017, and not to the trusts created. The rules provide that the market value of an asset for CGT purposes is taken as of 5th April 2017.

Therefore, provided the relevant criteria are met, on a future sale of such an asset, only gains accruing from 6th April 2017 onward can be taxable.

Tax and trusts

Trusts established by a non UK resident are now subject to special tax rules if the resident subsequently becomes “deemed domiciled” in the UK.

They might have what is called “protected status”, meaning that capital gains on the trust will not be attributed to the settlor when they become UK deemed domiciled  provided  no assets are added to the trust once the settler has become UK deemed domiciled.

If distributions from the trust are required, legal advice is recommended as if the relevant rules are not followed protected status may be lost.

1 September 2017 by

So you want to be a Property Tycoon?

Don’t we all? Well, before you start thinking of immediately quitting your 9-5 to live the dream, you should look […]

8 September 2017 by Timothy Lucas

Restricting distributors from online selling – PING lands in the rough

Many golfers will be familiar with the feeling – all you need to push yourself to the next level is […]

Signup To Our Weekly e-News

"*" indicates required fields

We’ll never share your details with any third party in line with our privacy policy.