Autumn Statement Explained: Non-Domiciled Individuals

The Autumn Statement confirmed that the proposed changes for non-domiciled individuals will go ahead as previously planned from April next year. From 6 April 2017, UK resident non-UK domiciled individuals will be deemed to be UK domiciled for all tax purposes if they have been UK resident for 15 of the previous 20 tax years, or if they were born in the UK with a UK domicile of origin. Non-UK domiciled individuals who have settled a non-UK resident trust before being deemed domiciled in the UK will not be taxed on the overseas income and overseas gains retained in the trust as long as neither the settlor, his spouse nor any minor children receive any benefits from the trust and also as long as the settlor has paid the remittance basis charge in at least one tax year prior to becoming deemed domiciled. From April 2017, inheritance tax will be charged on UK residential property when it is held indirectly by a non-UK domiciled individual through an offshore structure, such as an overseas company or an overseas trust. There will be a one-year window of opportunity from 6 April 2017 for non UK domiciled persons to analyse their overseas bank accounts which contain a mixture of income, gains and clean capital and separate out the constituent parts into separate bank accounts.

Non-domiciled individuals who will become deemed domiciled on 6 April 2017 should consider the following actions:

• Setting up at least one overseas trust prior to 5 April 2017 and transferring assets to that trust
• Paying the remittance basis charge in at least one tax year up to and including 2016/17 (note that the remittance basis charge can be claimed up to 4 tax years later, so it may be worthwhile reviewing earlier tax years to determine whether paying the remittance basis charge in an earlier tax year produces a better tax outcome).
• Analysing their overseas bank accounts to ensure that income, capital and gains are segregated prior to 5 April 2018 thereby allowing tax efficient remittances of clean capital in future years.

For more information please contact Gavin Stebbing.