Non-dom Update

It has been announced by the UK Government that the Finance Bill proposals relating to non-doms that were dropped prior to the election will be reintroduced, and that they will take effect from 6 April 2017 as originally envisaged. It is not clear when this will occur – the statement simply says "as soon as possible", and that could be as late as October, subject to no change of government.

There have been some minor technical changes to the proposals, but the main changes will proceed as expected. These main changes are:
  • a new definition of deemed UK domicile for individuals who have been resident in the UK for more than 15 out of the previous 20 years – encompassing all of income tax, capital gains tax and inheritance tax;
  • a new category of individuals treated as UK domiciled where they were born in the UK, acquired a domicile of choice outside the UK, but have since acquired UK residence;
  • new rules for the taxation of offshore trusts;
  • treating offshore structures as transparent for inheritance tax purposes where they hold UK residential property or debt is used to finance the acquisition of such property.
There will also be transitional reliefs where individuals who will become deemed domiciled under the new rules will be able to treat their offshore assets as being rebased to their market value on 6 April 2017 provided certain conditions have been met.

There will also be a ‘cleansing’ relief available to all non-UK domiciliaries – even those who do not become deemed UK domiciled on 6 April 2017 – allowing mixed funds held in cash to be separated into their constituent parts. Mixed funds are those that contain a mixture of clean capital, capital gains and / or income in the same account.

First published by Moore Stephens LLP