The UK has a well-established Resident Non Domiciled (“Res Non Dom”) scheme, which allows those residents of the UK who are domiciled outside of the UK to elect to be taxed only on UK source income (remittance basis of taxation).
Our article of September 2011, found here, sets out the then current tax rules allowing individuals, who are resident but not UK domiciled, to elect to be taxed under the Remittance Basis. This enables them to only be taxed on their UK income and gains, as well as any overseas income and gains remitted to the UK.
In the Summer 2015 and Spring 2016 budgets, various changes (as set out in the bullet points below) were announced to the scheme, and as set out in our article of 15 April 2016, found here.
What has now been communicated as a shortage of Parliamentary time in advance of the upcoming General Election, changes to the UK taxation of non-domiciles, which were to take effect from 6 April 2017, have recently been announced to have been put on hold, with some uncertainty as to when or how it will be further implemented. It is unclear at this stage as to whether implementation will be through a further Finance Bill after the election (and backdated in effect to 6 April 2017) or postponed to 6 April 2018.
These changes include:
- The new rule that would deem an individual to be domiciled in the UK for income tax, capital gains tax and inheritance tax after 15 out of 20 years of UK residence;
- The rule that would treat UK born domiciliaries who had acquired a domicile of choice outside the UK as being UK domiciled on taking up UK residence again;
- The changes to the taxation of offshore trusts;
- The introduction of inheritance tax charges on UK residential property held through offshore structures by non UK domiciliaries
In addition, the following reliefs will not be introduced:
- The rebasing of assets held on 6 April 2017 for individuals becoming deemed UK domiciled under the 15/20 rule on 6 April 2017;
- Cleansing of mixed funds;
- Relaxation of business investment relief rules
Caution is given to any planning on/ around the above until the election is over and it is clear how the Government will implement these proposed changes.
Watch this space for further updates on the issue.
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