Confirmed Tax Changes for Non-UK Domiciliaries
05 April 2018
The new non-domicile rules are now in force and they take retroactive effect from 6 April 2017. This follows the Finance (No. 2) Act 2017 receiving Royal Assent on 16 November 2017 and the additional Finance Bill. Although there had been some call for these rules to be delayed, this confirms that the Government’s project to reform the tax rules for non-UK domiciled individuals (non-doms) is being implemented.
In addition, a number of earlier proposals regarding onward gift rules involving offshore trusts have now been included in the Finance Bill 2017/2018, with an implementation date of 6 April 2018.
There have been some technical changes made and a clarification around the ability to un-mix pre 6 April 2008 funds, as well as confirmation that the IHT charges in relation to loans provided for the purchase of residential property, or guarantees given, cannot be based on more than the value of the underlying property itself.
BDO has produced a full analysis of the updated provisions covering:
- The new deemed domicile 15 out of 20 years (15/20) rule
- Rebasing for offshore assets for individuals who became deemed UK domiciled on 6 April 2017 under the 15/20 rule, and who meet the other conditions
- A grace period to unravel or ‘cleanse’ offshore mixed fund bank accounts
- The rules to charge UK inheritance tax on UK residential property held indirectly through an offshore entity
- Protections and reforms for offshore trusts
- Commentary surrounding proposed changes to the taxation of UK commercial property held by non residents
- An update on the current Business Investment Relief rules
- Actions to consider
Whilst these announcements represent mixed news, particularly the retrospective nature of the changes, it does finally allow taxpayers to proceed in earnest in readiness for the un-mixing of their accounts and, for those who qualify for the rebasing of foreign assets, consider potential actions.
The Private Client Team at BDO is well placed to advise on these changes having followed the proposals closely throughout. If you have any queries please contact your normal BDO adviser or any of those listed at the end of the April 2018 publication.
Download ‘Confirmed Tax Changes for Non-UK Domiciliaries - April 2018 Update’ below: