IMPORTANT DEVELOPMENTS FOR UK RESIDENT NON-DOMICILIARIES

Under new rules coming into effect on 6th April 2017, individuals who are currently neither domiciled nor deemed domiciled in the UK, but have been resident in the UK for at least 15 out of the last 20 tax years, will become deemed domiciled on that date for all UK tax purposes.

These individuals and those approaching this point would therefore be well advised to consider creating an Excluded Property Trust and adding any non-UK assets to the trust before they become deemed domiciled.

Although IPG does not provide tax advice, it is our understanding that, with the exception of UK residential property (even if held via an underlying offshore company owned by the trust), under the new rules the trust’s excluded property status will be retained indefinitely (provided the assets are kept offshore). Therefore, even after a person has become deemed domiciled, these assets will continue to be outside the UK IHT net.

It is also our understanding that the situation will be highly attractive for a non-UK domiciled settlor in that non-UK source income and all gains of the trustees (or any underlying non-UK companies) will be outside of the scope of UK tax. In some respects, this is a better regime than the existing one because it is not dependent on the payment of the remittance basis charge (which at its maximum level is currently £90,000 for any year in which the claim to be non-UK domiciled is made).