If you’re a non dom, then major changes are coming your way as from 6 April 2017. For non-UK domiciles who have been resident in the UK for at least 15 tax years – it is their ‘Deemed Domicile Day’. On that date, those people will be declared deemed domiciles for all 3 personal taxes, which are: Income Tax (IT), Capital Gains Tax (CGT) and Inheritance Tax (IHT).
The threshold for becoming a deemed domicile is going to be 15 out of the last 20 tax years for all three taxes (so a reduction in the current 17 year period for IHT only). You will become deemed UK domicile at the start of the sixteenth tax year of residence.
So what’s changing?
As from 6 April 2017:
- Any non-UK domiciles who have been resident in the UK in at least 15 of the past 20 tax years will become deemed UK domiciled for income tax, CGT and IHT.
- They will be taxable on their worldwide income and gains and pay IHT on their worldwide assets.
- The Remittance Basis Charge (RBC) will, therefore, no longer be available after 15 tax years.
- Foreign gains and foreign income arising within an excluded property trust set up by a non-UK domiciles before they became deemed domiciled will not be assessed on the settlor, until they receive benefits.
- People who were born in the UK with a UK domicile, but have acquired a foreign domicile of choice since, will be treated as UK domiciled if they are currently UK resident or come back to live in the UK. Any excluded property trusts they have previously established will no longer be excluded property whilst they are in the UK.
- Deemed domicile status can only be lost after six complete consecutive tax years of non-UK residence for income tax and CGT, or three years for IHT (people who are UK domicile would have to prove they had a foreign domicile of choice for that period).
- For those who become deemed domicile on 6 April 2017 overseas assets will be rebased to their market value on 5 April 2017 if the taxpayer has previously paid the RBC, removing previous growth from the UK CGT calculation.
- There will be a temporary window of two tax years (2017/18 and 2018/19) during which individuals can rearrange their mixed funds overseas to separate them into their constituent parts (for example: clean capital, income, gains).
- IHT will be levied on UK residential property held indirectly by non-UK domiciles through an offshore entity (such as a foreign company, partnership or a trust).
- If a non-UK domicile leaves the UK and becomes non-resident prior to 6 April 2017 – and does not return – they will not be subject to the new rules.