UK and International Tax news
Reform Of Non Dom Taxation Update
Thursday 15th September 2016
HMRC has recently published its update on proposals included in its September 2015 consultation to end permanent non dom status, for the purposes of income and capital gains tax, and consult on proposals to charge IHT on UK residential property.
The latest consultation document sets out the detail of the proposals which will restrict certain individuals from claiming non dom status for tax purposes. A ‘deemed domicile rule’ will be introduced so that longer term UK residents being those who have been UK resident for 15 out of the previous 20 years can no longer claim to be non UK domiciled for tax purposes. This will abolish permanent non dom status and the remittance basis of taxation will no longer be available.
The new rules will also ensure that individuals who are born in the UK and who are UK domiciled at birth will not be able to claim that they are not domiciled for tax purposes while they are living in the UK.
The Government has also announced that it will legislate so that IHT will be charged on all UK residential property, including property held indirectly by non doms through offshore companies, partnerships and trusts. To implement the extended IHT charge, the government proposes to remove UK residential properties owned indirectly through offshore structures from the current definitions of excluded property currently provided by s.6 and s.48 IHTA84. The effect will be that such UK residential properties will no longer be excluded from the charge to IHT. This will apply whether the overseas structure is owned by an individual or a trust.
This change is intended for the 2017 Finance Bill and a separate consultation will be published to seek views on the detail of this proposal.
There will be no change to the treatment of companies other than close companies and similar entities.
No changes will be made to the taxation of UK property held by corporate or other structures owned by UK domiciled individuals or by trusts made by UK domiciled individuals.
This consultation runs to 21 October 2016.
If you would like further information on the consultation, please contact Keith Rushen on 0207 486 2378.
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