Following the consultation regarding the proposed changes to non-UK domicilaries (non-doms) from 6 April 2017, HM Revenue & Customs has recently published draft legislation for inclusion in the Finance Bill 2016.
In line with the government’s previous announcements, the draft legislation confirms that a non-UK domiciled but UK resident individual will be ‘deemed domiciled’ for UK income tax and capital gains tax purposes if they meet either of the following two conditions:
The first condition is that the the non-dom individual:
i) Was born in the UK; and
ii) Has a domicile of origin in the UK; and
iii) Is UK resident.
The second condition is that the non-dom individual has been resident in the UK for at least 15 of the 20 tax years immediately preceding the tax year in question (ie they are a ‘long-term non-dom’).
The new deemed domiciled rules will also apply to inheritance tax, and draft inheritance tax legislation was published in late 2015.
In so far as the announcement goes, there do not appear to have been any changes from the proposals outlined during the consultation, although the draft legislation includes various provisions that need to be amended as a result of this policy change. There is a short period of consultation on the draft legislation with comments invited no later than 2 March 2016.
Disappointingly, no further details have been announced regarding the new tax rules for non-doms who have settled offshore trusts and these changes will be legislated for in Finance Bill 2017. However, it has been confirmed that long-term non-doms who created offshore trusts before they become deemed domiciled “will not be taxed on trust income and gains that are retained in the trust. These protections will be legislated in Finance Bill 2017”.
It is still unclear how the proposed changes to trusts will work; for example, how will they interact with the existing rules for offshore trusts settled by non-doms, and will they apply only to long term non-doms, or to all UK resident non-doms?
UK resident non-doms are recommended to seek advice to understand how these changes may affect them.
More details on the changes announced in the Summer Budget 2015 can be found in our October 2015 briefing.