Following the announcement in the Summer Budget, a consultation document was released on 30 September 2015 with some draft legislation. The consultation period has closed and we can expect legislation to be included in Finance Act 2016 and be effective from 6 April 2017.
The main points under consultation are:
- Non-domiciled individuals who have been resident in any part of 15 out of the past 20 years will be treated as "deemed domiciled" for all UK tax purposes with effect from the start of their 16th year of residence. It is possible to restart the clock for the purpose of the 15 year rule, provided an individual is non-resident for at least six complete UK tax years.
- The 15 year rule will not impact an individual’s domicile under general law, only the UK tax treatment. It will not impact the domicile of the individual’s children, whose domicile under general law and deemed domicile for tax purposes will be tested separately and by reference to the child’s own circumstances.
- Individuals born in the UK (to UK-domiciled parents) who have acquired a domicile of choice in another country under general law will not be able to claim non-dom status if they return to the UK and become tax resident.
- The UK tax treatment of offshore trusts is being considered. The consultation document confirmed that trusts established prior to an individual becoming deemed domiciled will remain protected and outside the scope of IHT. Additionally, it may be possible for the assets in the trust to benefit from a pseudo-remittance basis - i.e. income and gains will not be taxed on the settlor until payments or benefits are received from the trust. If a non-UK domiciled individual does benefit, how those benefits are taxed may change, although the detail of how those benefits may be taxed has not yet been announced.
The £90,000 remittance basis charge for those resident in the UK in 17 out of the last 20 tax years will become redundant from 6 April 2017. There are no changes to the £30,000 and £60,000 remittance basis charges for those resident in the UK for seven out of nine years and 12 out of 14 years respectively.
The proposed changes are wide reaching and it is important that non-UK domiciled individuals review their personal circumstances in preparation for the changes.