Non-dom tax changes from April 2017

Changes to the taxation of non-UK domiciled individuals and non-UK resident trusts were introduced and effective from April 2017.

What are the changes?

• Inheritance Tax (IHT) will be charged on UK residential property held through offshore companies. Valuations will take debts and the company’s net value into account.
• The remittance basis of taxation will cease to be available to individuals who have been UK tax resident in 15 of the previous 20 UK tax years and have so become "deemed-domiciled": this will impact on individuals from the start of their sixteenth tax year in the UK.
• "Deemed-domiciled" status for IHT purposes will cease after four consecutive tax years of non-UK residence, effectively keeping the current 'IHT shadow’ treatment. However, individuals will still need to remain non-UK resident for six complete UK tax years to re-start the clock in the event they decide to return to the UK.
• Individuals who became “deemed-domiciled” for income tax and CGT purposes on 6 April 2017 will be able to re-base their non-UK assets' values at that date if they have previously paid the remittance basis charge at least once since 2008. They will also enjoy the ability to make tax-free remittances of any gains realised on disposals of such non-UK assets after 5 April 2017 to the extent such gains were attributable to the pre-April 2017 period.
• There will be an ‘amnesty’ on segregating mixed funds during the 2017/18 and 2018/19 tax years, allowing more tax-efficient remittances for remittance basis users in the future.
• Pre-“deemed-domiciled” trusts will be afforded “excluded property” status for IHT. In addition, their settlors will benefit from protections from attribution rules for CGT and Income Tax, provided conditions are met: these trusts will therefore be useful ‘freezers’ for settlors and families who do not intend to access trust funds whilst resident in the UK.