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Non Dom update - Autumn Statement

Foreign domiciled individuals may be wondering whether the Autumn Statement contained any further surprises for them.  However, the Chancellor was notably silent on this area and the proposed legislation affecting non domiciled individuals is still to come. It is expected that much of this will be released in early 2016 but the Inheritance Tax (IHT) provisions will not be known until early 2017.

If the legislation emerges as proposed, anyone resident in the UK for more than 15 out of 20 years will be deemed domiciled for all tax purposes. The remittance basis will not be available from that time. However, it is still possible to take steps to shelter foreign assets from UK IHT before that time occurs by settling foreign assets into trust. Anyone approaching deemed domicile in the UK should consider taking action prior to 6 April 2017 and they should contact their usual Mercer & Hole contact.

The UK taxation of benefits received from offshore trusts by UK residents is a complex area. Anyone who is both the settlor and beneficiary of a trust will have a different basis of taxation from an individual who is a beneficiary only. Whilst the rules are not yet certain it is worth considering in advance the overall impact on existing arrangements.  From the time legislation is final, it is likely that the timescale to implement changes before April 2017 will be short.

Non domiciled individuals owning UK residential property in offshore holding vehicles will face UK IHT consequences from April 2017. In some cases this exposure will be additional to the ATED charge.  The way in which IHT will apply will depend on the overall circumstances of the structure.  As soon as the IHT legislation is finalised, we will be able to consider what action is necessary to mitigate this.

The Treasury’s consultation documents hint at some form of relief for anyone wishing to de-envelope i.e. remove a UK property from a company.  Anyone considering de-enveloping will be wise to consider their options at an early stage.  Once details of the relief are released, they will then be well placed to take action quickly to best achieve the overall objective within the available timeframe.

To discuss this further please contact Lisa Spearman or another member of the Private Client Team.

 

 

Date: 26th November, 2015
Author: Lisa Spearman

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