Budget 2016 Some light relief for non doms
Whilst new legislation is due to come into effect after 5 April 2017, we are still waiting on much of the detail. We already know that non doms living in the UK will face significant changes. They will be deemed UK domiciled if they have been resident in the UK for 15 out of the past 20 years. Individuals with a UK domicile of origin, who have since acquired non dom status, will be deemed UK domiciled if they are resident in the UK and were originally born in the UK.
The government also confirmed that any UK residential property owned by non doms, including property held within non-UK trusts and companies will become within the scope of Inheritance Tax (IHT) from 6 April 2017.
Non doms who have trusts established prior to being deemed UK domiciled will not be taxed on income and gains from the trust and which are retained within it, although we expect that extractions or benefits from a trust will be subject to tax at that stage.
What we have learned in Budget 2016 is that non doms who become deemed UK domiciled in April 2017 can treat the base cost of their non-UK based assets as the market value on 6 April 2017. This presents an opportunity for rebasing and the possible liquidation of offshore assets for remittance to the UK at little or no UK tax cost, depending on the nature of the underlying funds. A further potential upside of this ruling is that administration could become simplified, however, valuations at 6 April 2017 will need to be sought. This will be welcome news to those non doms who hold assets outside the UK with complex histories.
Furthermore, we are told that individuals who will be deemed UK domiciled under the 15 out of 20 year rule will be able to access a transitional provision to obtain certainty on how remittances of offshore funds to the UK will be taxed. No further details are available but legislation is expected in Finance Bill 2017.
If any of the issues above affect you and you would like to discuss them in more depth, please contact Alice Steidl or a member of our Private Client Tax Services team.
Date: 17th March, 2016
Articles from this Author
26th July, 2017
Update: Non-UK domiciles and IHT changes
30th May, 2017
IHT exposure: Non UK domiciliaries and UK residential property
15th December, 2016
The good news part 2: Identifying clean capital in a mixed account
29th April, 2016
Fall in the rate of CGT: Non-UK residential property
Contact a Private Client Partner
For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole