The UK Government will radically revise the UK tax regime for long-term resident but non-domiciled individuals from 6 April 2017.
These plans have been the subject of considerable consultation and draft legislation for over a year. This private client update provides revisions to our previously published note in December 2016 (view here) to reflect the Government’s publication of further draft legislation and guidance.
The effect of the changes is that permanent non-domicile status will no longer be possible for individuals who have been long-term resident in the UK; those tax resident in the UK for 15 of the previous 20 tax years will become deemed domiciled and be subject to UK tax on their worldwide personal income and gains. Existing deemed domiciled rules for inheritance tax will also be aligned with this rule so that an individual will be deemed domiciled for inheritance tax purposes once the individual has been UK resident for 15 of the previous 20 years. In addition, UK residential property held by non-UK domiciled individuals through an offshore structure will become subject to UK inheritance tax (IHT).
The publication on 5 December 2016 of the draft Finance Bill 2017, further draft legislation published on 26 January this year, together with the Government’s response to public comments on its most recent domicile consultation document (Reforms to the taxation of non-domiciles: further consultation published in August 2016) provide most of the details for the implementation of this new regime. Although the reforms will be introduced in less than five weeks, further guidance could still be published potentially at the next Budget on 8 March. This update reviews the new draft legislation and changes it makes to current proposals including some surprising and far reaching amendments which will have unexpected consequences for trusts and individuals who may have thought themselves unaffected by the amendments to date.
To view the full update, please click here.