26 April 2017

Changes to non-dom tax status: where does this leave me?

Back in July 2015, the UK’s new Government announced in a surprise Summer Budget that it would be bringing ‘an end to non-doms’ with fundamental changes to the way UK resident non-domiciled individuals would be taxed. Since then there has been a lot of debate on the proposed change and how it might work.

The new rules were then included in the Finance Bill published in December 2016, but were dropped following the calling of the snap General Election in May of this year. It has now been confirmed that the rules will be reintroduced following the Summer Recess and should become law by the end of 2017. The proposals are broadly the same as the earlier version we saw, and would still take effect retrospectively from 6 April 2017, with some further changes from 6 April 2018.

UK taxpayers who are affected must change their tax plans. As the UK political scene remains uncertain, it is vital to keep up to date with what the change to non-dom status means for you, or for your clients.

What is changing?

The are four main changes to be aware of.

1. Non-doms will be ‘deemed domiciled’ for all tax purposes once they have been resident in the UK for more than 15 of the last 20 years. Once deemed domiciled, a non-dom will be taxed as a regular UK resident on all income and gains. There are some tricky and unexpected ways in which this 15 year period may be calculated, so it is best to seek advice on this.

2. As a regular UK taxpayer, they will then be taxed (for income, capital gains and inheritance tax) on all assets around the world.

3. People born and domiciled in the UK will no longer be able to claim non-dom status so long as they are living in the UK.

4. Once an individual becomes deemed domiciled, depending on the exact circumstances, they could start to be taxed when they, their spouse or children start to receive any benefits from any trust they have. Again, the way this is going to work can be complex and you should seek advice on your trusts in light of these proposed changes.

At the same time, the UK government is introducing new inheritance tax charges for companies owning UK property.

We will post updates when they happen on Twitter, follow #withersnondoms


Category: Article