George Osborne’s eighth Budget has reiterated the announcement made in the Summer Budget 2015 that UK Res Non Doms who have been resident in the UK for 15 out of the past 20 years will become deemed UK domiciled, for all taxes, after 5th April 2017, thus bringing to an end the indefinite nature of the Res Non Dom status. Draft legislation, however, has not yet been provided.
Further changes are envisaged, in that the time required to restart a “domicile clock” by leaving the UK will increase from four years to five years, and UK citizens who acquire their Non Dom status by moving abroad will lose it as soon as they return to the UK. In addition, individuals who are born in the UK will no longer be able to inherit the foreign domicile of their parents.
As a result, after 5th April 2017, those Res Non Doms who are deemed domiciled in the UK will be taxable on their worldwide income and gains and the remittance basis of taxation will no longer be available to them. In addition, their worldwide estate will be subject to inheritance tax. It will therefore no longer be advantageous to hold UK property assets in a non-UK company or use trust/debt arrangements.
However, it has been confirmed that such “deemed doms” won’t be subject to UK tax on the income and gains in an offshore trust that was established before they became deemed doms.
In addition, it was confirmed in the Spring Budget that deemed-doms, will be allowed to treat the base cost of their personally held foreign assets as the market value of the asset at 6th April 2017 for capital gains tax purposes. Therefore only the gains arising and accruing after this date will be subject to CGT.
Osiris can assist Res Non Doms in reviewing their offshore structures in light of these significant changes, and in undertaking the necessary planning now to limit significant tax liabilities in the future.