Non-Dom Reforms Will Have Effect From 6 April 2017 As Originally Planned


The government has confirmed that the changes to the taxation of non-domiciles, which were withdrawn from the pre-election Finance Bill, will take effect from 6 April 2017 as originally planned.

Updated draft clauses in relation to the new deemed domicile regime and IHT on UK residential property have been published for inclusion in the next Finance Bill which will be introduced as soon as possible after Parliament’s summer recess ends on 5 September 2017. The government have confirmed that the provisions, which were removed from the Finance (No.2) Bill 2017 following the announcement of the snap General Election, are to be backdated to 6 April 2017 as originally planned.

As a reminder, the key changes are as follows:

• Individuals who have been resident in the UK for 15 out of the previous 20 years will, from 6 April 2017, be deemed domicile for all tax purposes;

• Transitional rules will enable affected resident non-doms to separate out mixed funds into their constituent parts at any time up to 5 April 2019, so that ‘clean’ funds can be brought back to UK without tax charge;

• Automatic rebasing of non-UK assets will apply for CGT purposes for certain individuals who become deemed domicile under the new rules on 6 April 2017;

• All UK residential property will become subject to UK inheritance tax – even if held indirectly through an offshore structure by a non-UK domicile;

• New rules for valuing benefits from offshore trusts with protections for trusts established before becoming deemed domicile – unless those trusts are tainted by additions;

• Revival of UK domicile status for returning non-doms.

Some minor amendments have been made to the updated clauses, however these are mainly technical changes and the basic principles of the original proposals remain the same.

It should be noted that the conduit and benefit to family rules are not yet in the draft legislation – they are expected to be in the Finance Bill 2018 and will be effective from 6 April 2018.

Many people affected by the deemed domicile and enveloped dwellings reforms will already have implemented planning before the Finance Bill was pared back; however, the delay – and the retrospective effect of the new legislation – could create a huge issue for the families of those non-doms who died owning UK residential property indirectly through an offshore company or trust structure between 6th April and 13th July (when it became known that the legislation would be back-dated).

Clients keen to press on with preparations now that the announcement has been made will need to be mindful of the fact that nothing is guaranteed until the Finance Act becomes law – which is unlikely to be until late October or November at the earliest – and with this in mind, it may therefore be prudent to hold off taking any concrete steps which would give rise to actual tax liabilities until more is known.


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