The government has revealed more details of how the proposed changes to non-domicile status will work.
A new consultation document also outlines how inheritance tax (IHT) will be charged on UK property held through an offshore structure and asks for ideas on how business investment relief could be made more attractive.
From 6 April 2017, UK residents will not be able to retain non-domicile status indefinitely. Instead, individuals will be treated as domiciled in the UK for income tax, capital gains tax (CGT) and IHT after they have been UK resident for at least 15 of the previous 20 years – the ’15/20’ rule on 6 April 2017 can opt to rebase assets to their market value on 5 April 2017 for CGT purposes, subject to conditions. They will also have one year from April 2017 to rearrange mixed offshore income and/or capital gains funds to enable non-taxable capital to be remitted free of tax. Residential properties owned indirectly through an offshore company or partnership will be brought within the charge to IHT. Relevant debts, such as a mortgage, will be deductible.
Since April 2012, individuals who use the remittance basis have been able to bring overseas income and gains into the UK without a tax charge if they do so to make a commercial investment. The consultation seeks views on how business investment relief can be expanded to increase take-up, while ensuring it cannot be used for tax avoidance.
If you stand to be treated as deemed domiciled from April 2017, or will be returning to the UK after that date, please discuss with us.