As expected, the has Treasury released its consultation document on the forthcoming changes to the taxation of non-domiciled individuals (‘non-doms’). The full consultation paper can be found here.
For those who would prefer a more abridged version, the headlines as we see them are as follows:
- As originally intended, from April 2017:
- Non-doms will treated as domiciled (‘deemed domiciled’) for all UK tax purposes if they have spent more than 15 of the preceding tax year as UK resident.
- Those born in the UK with a domicile of origin in the UK will be treated as
UK domiciledwhile they are resident in the UK (note: those born in the UK with a non-UK domicile of origin will not be affected by this).
- The outlook looks very positive for offshore trust structures post-April 2017, as it is proposed that non-doms will not be subject to UK tax in respect of income/gains as they arise in offshore trust structures, but only if benefits are received. As noted in the consultation, this would be a sea change in the UK treatment of offshore trusts, and it remains to be seen whether this relatively generous treatment will extend to non-doms who are not themselves caught by the deemed domicile provisions.
- The knock-on effects to the inheritance tax regime are likely to be quite interesting, particularly for mixed domicile spouses/civil partners and those leaving the UK. The changes inevitably mean that those who are deemed domiciled would normally need to spend longer as non-UK resident after leaving the UK to break their deemed domicile status – up to 6 years potentially. The rules for UK domiciled individuals leaving the UK may even be impacted, and they may find it even harder than previously to shake off a UK domicile.
We now have a clearer picture of the likely changes, and the framework in which we will be working from April 2017 onwards. It will be interesting to see the outcome of the consultation, and the draft legislation when it is released later in the year.
We continue to work with new and existing clients to digest the impact for them, and those who are likely to be affected should contact us to address their own particular situation and opportunities for planning pre- and post-April 2017.