UK and International Tax news

Non Dom Tax Changes From April 2017

Tuesday 25th April 2017

Changes to the taxation of UK resident but non domiciled individuals came into effect on 6 April 2017.

Under the new rules, long term UK residents and UK ‘returners’, being those born in the UK with a UK domicile of origin, but who have left the UK and acquired a domicile elsewhere, and later return to the UK, may be taxed on their worldwide income and gains in the same way as individuals who are domiciled in the UK under general law.

The remittance basis of taxation of foreign sourced income and gains is no longer available to them, subject to a £2,000 de minimis rule. Previously under the remittance basis of taxation, non doms were generally not taxed in the UK on their foreign sourced income or gains that were not remitted to the UK.

From 6 April 2017, foreign income and foreign gains realised before the tax year in which an individual becomes UK resident and is deemed domiciled, and in respect of which the remittance basis is claimed, will still only be subject to UK tax if they are brought into the UK.

Now a non dom will be deemed UK domiciled for UK income tax and capital gains tax purposes if that individual has been resident in the UK for 15 out of the last 20 years, or was born in the UK, has a UK domicile of origin, and is UK resident for the tax year in question.

Individuals will however lose their deemed UK domiciled status if they emigrate from the UK and are not resident in the UK for at least six consecutive tax years thereafter.

Where an individual loses their deemed UK domiciled status, they may use the remittance basis of taxation until they meet the 15/20 test again, but only if they keep their non UK domiciled status under general law.

There are two transitional relief measures available to non doms, but not returners, who have previously claimed the remittance basis and who are subject to the new rules as of April 6, 2017.

Non doms, who meet certain conditions, may be able to revalue/rebase their overseas capital assets to their market value on 5 April 2017, for tax purposes. This should ensure that only gains accruing from 6 April 2017 will be subject to UK capital gains tax or income tax.

Non doms, who meet certain conditions, may rearrange mixed funds held in overseas bank accounts and transfer the constituent parts (untaxed income, untaxed capital gains and capital elements) to separate accounts. This should allow non doms to bring capital from overseas into the UK without a tax charge; previously these individuals would have been taxed on the remittance basis.

With effect from 6 April 2017, UK inheritance tax will apply 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 above, please contact Keith Rushen on 0207 486 2378.

 

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