Year-end tax issues

UK tax reforms in relation to non-UK domiciled individuals are fast approaching, here’s a re-cap of the key issues facing individuals and some of the options available to them while the planning window remains open.

What changes from April 2017?

UK inheritance tax will apply to UK residential property irrespective of how it is held. Non-doms will no longer be able to mitigate inheritance tax on UK residential property through the use of an offshore company or a trust.

The number of years it takes to become UK deemed domiciled for inheritance tax purposes is reducing. Currently you become deemed domiciled after being UK resident for 17 out of the past 20 tax years. That’s now reducing to 15 out of 20 meaning it will be quicker to acquire and longer to lose your deemed domicile status.

The concept of deemed domicile is extending to UK income tax and capital gains tax. This means permanent non-dom status is no longer possible.

Individuals with a UK domicile of origin will automatically re-acquire their UK domicile when returning to the UK, regardless of the length of time previously spent in the UK.

Who’s affected?

Non-UK domiciled individuals with a domicile of origin outside the United Kingdom will be deemed to be domiciled in the UK for all tax purposes after they have been UK resident for 15 of the last 20 tax years. As a result, they will be subject to global taxation on an ‘arising basis’.

-Any UK resident non-domiciled individuals.

-Anyone approaching 15 years UK tax residency.

-Individuals with a UK domicile of origin considering a move back to the UK.

-Any individual who holds UK residential property through an offshore company or trust

To be prepared individuals should be considering

What their domicile of origin/choice is?

If UK tax resident non-dom, when they will become deemed domiciled?

What their long-term plans are? What structure best suits their needs?

Do they have assets that could be placed into a structure?

Our recent blogs offer more in-depth look at these options:

Review how UK residential property is held

Many owners of UK residential property are (or should be) looking at their assets and reassessing them to ensure they are not caught up by the new rules. 

Consider the Protected Settlement

The UK Government introduced a ‘protected settlement’ regime for non-UK trusts settled by individuals before they become deemed domiciled in the UK. 

Look into alternative structures such as pensions 

For more information please contact our Tax Consultant Hannah Roynon-Jones