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Non-UK domiciled taxpayers - all change from 2017

15th September 2016

From April 2017, there will be changes to the rules for non-domiciled taxpayers in the UK.

Remittance basis

  • At present an individual is deemed UK domiciled for inheritance tax when they have been UK resident for 17 out of the last 20 tax years.  Income Tax and Capital Gains Tax do not currently have a deemed domicile rule.
  • From April 2017, non-domiciled taxpayers who have been a UK resident for more than 15 of the last 20 tax years will be deemed UK domiciled for all tax purposes.
  • Anyone treated as deemed domiciled will not be able to access the remittance basis charge and will be taxable on worldwide income and gains.  Worldwide assets will be subject to inheritance tax.
  • It will now take five years to lose your deemed domicile for inheritance tax purposes when you leave the UK rather than three years. 
  • The remittance basis charges of £30,000 and £60,000 for those resident for 7 out of 9 and 12 out of 14 years respectively remain unchanged.
  • The £90,000 remittance basis charge for those resident for 17 out of 20 years will be abolished as it is no longer relevant.
  • Taxpayers with a UK domicile of origin who move abroad and take up an overseas domicile will be taxed as UK domiciled if they return and become UK resident again.

Inheritance Tax on UK residential property

  • From April 2017, all UK residential property held directly or indirectly (i.e. through a company, trust or partnership) by a foreign domiciled taxpayer will be subject to inheritance tax.

  • There will be no exemption for let or occupied properties, nor will any de minimis limit apply as currently with properties subject to the Annual Tax on Enveloped Dwellings (ATED).
  • Inheritance Tax will be due when a specifically defined chargeable event occurs, including the death of an individual shareholder or the tenth anniversary of the trust.
  • The definition of ‘excluded property’ will be amended so that it no longer includes shares in companies which derive their value from UK residential property. 
  • Only the value of the UK residential property will be chargeable to Inheritance Tax if the company has diverse assets. 
  • A further consultation is now open and legislation will be included in Finance Bill 2017.

For more information please speak to your usual haysmacintyre contact or contact Nigel Landsman.