Today’s Autumn Statement confirms that the sweeping changes to the taxation of non-UK domiciliaries (“non-doms”) which are due to take effect in April 2017 remain on track.
Further details and legislation on these proposals will be released on 5 December.
Individuals will then have just a few months to plan and execute any restructuring which is required. Timing will be tight particularly where structures involving foreign trusts and companies need to be collapsed.
Whilst it is frustrating that we are still two weeks away from having a full set of draft legislation to consider, the Autumn Statement does not – thankfully – include any significant new proposals.
As previously announced, an individual will be deemed to be domiciled in the UK for income tax, capital gains tax and inheritance tax if he or she has been UK tax resident for 15 of the last 20 tax years or if he or she was born in the UK with a UK domicile of origin and returns to live in the UK.
In addition, UK residential property held in a foreign company or trust structures will fall into inheritance tax.
Additional reliefs are proposed which will soften the impact of some of these changes.
Non-doms who have settled foreign trusts before becoming deemed UK domicile will not be taxed on foreign income and gains arising in the trust. However, previous announcements suggest that a trust will lose its protected status if additions are made into the trust or (at least for capital gains purposes) if distributions are made from the trust.
Although not mentioned in the Autumn Statement, it is anticipated that individuals who become deemed domicile on 6 April 2017 will be entitled to re-base their foreign, directly-held capital assets to their market value on that date, meaning gains accrued up to that date will be non-taxable, even if remitted. Whether this will be extended to individuals becoming deemed UK domicile in later tax years remains to be seen.
It is also expected that all non-doms will have from 6 April 2017 to 5 April 2018 to separate foreign funds which have been “mixed”. This will allow the “clean capital” element of such funds to be remitted to the UK without triggering tax charges, which will be a significant concession for some long-term non-doms.
There will also be a relaxation of the rules regarding business investment relief which will make it easier for non-doms to remit foreign income and gains to the UK to invest in trading companies without triggering a taxable remittance.
The annual charge on enveloped dwellings for 2017/18 will rise only in line with inflation. Given more significant increases in previous periods, this is something of a relief.