UK non-dom retrospective action confirmed

Publication: Changes for non-UK domiciliaries

17 November 2017

Finally, the new non-domicile rules are now in force and it is confirmed that they take retroactive effect from 6 April 2017. This follows the Finance (No. 2) Act 2017 receiving Royal Assent on 16 November 2017.

As a brief summary, for non-UK domiciliaries and offshore trusts, the main changes that took effect from 6 April 2017 are as follows:

The introduction of the deemed domicile rule for all tax purposes for those who have lived in the UK for 15 of the last 20 tax years
The ability to rebase foreign sited assets for capital gains tax purposes for those deemed domiciled individuals
Specific measures for those born in the UK with a UK domicile of origin to treat them as UK domiciled
The ability to cleanse mixed funds for all non-doms who have previously claimed the remittance basis of assessment
Certain protections for offshore trusts as well as tainting provisions
The introduction of ‘look through’ Inheritance Tax rules where UK residential property is held within a corporate, partnership or trust structure.

A number of further proposals, such as anti-conduit rules involving offshore trusts, are expected to be enacted in ‘Winter’ Finance Bill 2017-2018 with a view to introducing them from 6 April 2018 once that receives Royal Assent. While this should ultimately provide more clarity, unfortunately, it adds a further layer of complexity for the 2017/18 tax year as trustees and their beneficiaries will now need to take into account two sets of rules when deciding whether and when to make a distribution or take benefits from an offshore trust.

Whilst these announcements represent mixed news, particularly the retrospective nature of the changes, it does finally allow taxpayers to proceed in earnest in readiness for the un-mixing of their accounts and for those who qualify for the rebasing of foreign assets, calculate the tax consequences of any disposals. Guidance on the practical application of the rules is expected in due course.

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