Changes to deemed domicile rules
In July 2015, the then Chancellor George Osborne announced a series of reforms to the non-domicile rules. The new rules were due to come into effect from April 2017, but were removed from the cut-back Finance Bill that was rushed through parliament before the general election. It has now been announced that the necessary legislation to introduce these reforms will be included in the new Finance Bill to be published after the summer recess and that these measures will have retroactive effect from April 2017 as originally intended.
The new rules will mean that any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes. In addition, individuals who were born in the UK, to UK domiciled parents, will no longer be able to claim non-domiciled status whilst they are resident in the UK.
Under the proposed legislative changes, those deemed domiciled in the UK from April 2017, will be treated as if they were domiciled in the UK for income tax and capital gains tax from the start of the 2017-18 tax year. These measures are intended to prevent those with the most significant links to the UK from claiming non-dom status.
The existing inheritance tax deeming provisions will also be aligned with the new 15 years out of 20 rule. There will be transitional reliefs put in place including the facility to rebase offshore assets for CGT purposes. It has also been announced that income and gains arising in overseas trusts created by foreign domiciled persons before they become deemed domiciled under the new rules will not be taxed if they are retained in the trust or its underlying entities.
Non-doms that remain unaffected by these changes and wish to retain access to the remittance basis of taxation must pay an additional sum in addition to the tax on any income or gains remitted. This sum is known as the Remittance Basis Charge (RBC). The RBC charge for individuals who have been UK resident for at least 7 of the last 9 years is £30,000. The charge for individuals who have been resident in the UK for at least 12 of the last 14 years is £60,000.