Changes to the taxation of UK resident non UK domiciled individuals were announced back in the July 2015 Budget. Two Autumn Statements, one Budget and two Consultation Documents later, there is still no definitive legislation to enable UK resident non doms to take decisive action. However, this Autumn Statement has re-confirmed that the changes will take effect, as planned, from April 2017: any hopes that Brexit or the sheer complexity of the changes may delay their implementation have now faded.
To recap, the government, (in their own words) in order to make the tax system fairer for everybody:
- will end the permanency of non-dom tax status; from April 2017, all non-doms will be deemed UK domiciled for all tax purposes if they have been UK resident for 15 out of the past 20 years, or if they were born in the UK with a UK domicile of origin;
- non-doms with a non-UK resident trust set up before they were deemed domiciled in the UK will not be taxed on income and gains arising outside the UK and retained in the trust: this is a real opportunity for those who have not yet become deemed domiciled to shelter non UK income and gains from UK tax after they become deemed domiciled, so long as they do not need access to the funds;
- from April 2017 inheritance tax will be charged on UK residential property held indirectly by a non-dom through an offshore structure such as a company or trust; and
- the Business Investment Relief scheme rules will be modified to make it easier for non-doms taxed on the remittance basis to bring offshore money to the UK to invest in UK businesses.
It is expected that the detail will appear over the next few days with legislation in the draft Finance Bill due to be published on 5 December 2016. However, as we have said before, this gives non-doms very little time to take advice, make decisions and take action before 5 April 2017, especially with Christmas and New Year holidays. There will be no one solution to fit every set of circumstances as much will depend on family and work circumstances (is it feasible for you to cease to be UK resident and where do you go?); on the assets held and where; the need for access to the funds in the UK or overseas; the nationality of all family members (an American resident in the UK may have very different considerations to say someone from France); and many other factors, as well as length of UK residence.
If you think you might be affected, take advice and action as soon as possible. Much of the reorganisation will need to be completed prior to 6 April 2017 to be effective.