UK and International Tax news

HMRC Issues Guidance On Non Dom Tax Changes From April 2017

Tuesday 6th February 2018

HMRC has recently published its guidance on the deemed domicile changes which came into effect on 6 April 2017.

All non UK domiciliaries who have been resident in the UK for 15 out of the previous 20 years will be deemed UK domiciled for all taxes. Previously, deemed domicile only applied to inheritance tax and that was after 17 out of 20 years resident in the UK.

Individuals born in the UK [having a UK domicile of origin] will be treated as UK domiciled as soon as they return and become resident in the UK, even if they have acquired a domicile of choice elsewhere.

The change in the domicile status of former non UK domiciliaries not only affects income and gains, which will be taxed on an arising basis, but also accumulated income and gains from prior years which have not been subject to UK tax. Provisions have been introduced to smooth the transition however including the ability to cleanse mixed funds within a fixed two-year window. This means that funds made up of a mix of income, gains and original capital can be cleansed to give a pot of capital that can be remitted to the UK without a tax charge and a pot of income and gains that would trigger a tax charge if remitted.

There is also an impact on any offshore trusts set up while the settlor was non UK domiciled. Without protection the settlor would become liable for all the income and gains in the trust on an arising basis; but provided the gains and foreign source income remain within the trust there will be no tax charge for a protected settlement.

HMRC’s guidance covers:

Business investment relief

Cleansing mixed funds

Deemed domicile rules

Remittance basis changes

Residence, donicile and the remittance basis [RDR1]

Trust protections and CGT changes

Overseas workday relief

IHT deemed domicile rules

With effect from 6 April 2017, UK inheritance tax applies to UK residential properties owned indirectly by non doms through non UK close companies and overseas partnerships. Previously, such enveloped properties were not subject to UK inheritance tax.


If you would like further information on the latest guidance, please contact Keith Rushen on 0207 486 2378.

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