InsightsInsight - Tax Planning - POSTED: March 15 2016
Changes to the taxation of non-UK domiciled individuals
On 8 July 2015, the Chancellor announced plans to make three major changes to the taxation of UK resident, non-UK domiciled individuals with effect from 6 April 2017.
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Presently, foreign individuals with non-UK domicile can live and work in the UK without paying any tax on income and gains earned and kept outside of the UK. If, however, income or gains are remitted to the UK, the individual becomes subject to UK tax under the ‘remittance basis’.
The remittance basis sees individuals pay an extra charge, or otherwise the full amount of UK tax which would have been charged to a UK domiciled individual. The remittance basis charge increases with the length of an individual’s residence as follows; £30,000, £60,000 or £90,000.
In addition, an individual with a UK domicile of origin can acquire a non-UK domicile of choice and then return to the UK as a UK resident with non-UK domicile status; therefore meaning that they are only subject to tax on income and gains earned outside of the UK, or on income and gains remitted to the UK (as above).
The three proposed changes are as follows:
From 6 April 2017, UK resident, non-UK domiciled individuals will pay UK tax on worldwide income and gains once they have lived in the UK for 15 out of the past 20 years. The new rules will apply from 6 April 2017 to those individuals who have been living in the UK for 15 tax years at that date.
Under the new legislation, any individual with a UK domicile of origin returning to the UK and resuming UK residence will be treated as UK domiciled for tax purposes. Individuals can no longer retain their non-UK domicile status.
The government will now seek to tax trusts and offshore companies created by non-UK domiciled individuals containing UK properties. The property will be subject to Inheritance tax on the death of the individual, and during the lifetime of the trust. (Further consultation is expected to give a more detailed account of the proposed change after the budget)
What to do if I am UK resident but non-UK domiciled?
The new legislation comes into effect from 6 April 2017, therefore leaving just over a year in which to consider how the changes will impact individual circumstances. If you would like any advice on this matter, please contact our Private Client team.
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