Tax changes for non-UK domiciliaries from April 2017
13 December 2016
After a seemingly never ending period of uncertainty, with two budgets, autumn statements and formal consultations, at long last we now have the draft Finance Bill 2017 containing the changes to the taxation of non-UK domiciled individuals. The Bill will be effective as of 6 April 2017.
Despite pressure to delay the proposals, particularly following Brexit, the Government’s project to reform the tax rules for non-UK domiciled individuals (non-doms) will now be implemented.
The announcement makes clear that the Government’s aspiration for a tax system that “balances fairness and international competitiveness” remains the same.
While many of the changes are in line with those previously put forward, there are some new points to be aware of which, for some taxpayers, will be welcomed though there may be a sting in the tail for the unwary. It is gratifying to note that the Government have listened to professional advisers and, particularly for offshore trusts, have relaxed their initial proposals considerably. BDO, along with others, has been in close dialogue with the Government in trying to ensure that the proposals put forward are fair, but at the same time reminding them of the value that non-doms bring to this country.
The key elements of the proposals are:
- The new deemed domicile 15 out of 20 years (15/20) rule
- Rebasing for offshore assets for individuals who become deemed UK domiciled on 6 April 2017 under the 15/20 rule
- A grace period to unravel or ‘cleanse’ offshore mixed fund bank accounts
- A charge to UK inheritance tax on UK residential property held indirectly through an offshore entity
- Protections and reforms for offshore trusts
- Making Business Investment Relief more accessible.