Non-dom tax changes - no respite in the autumn statement

24 November 2016


In his Autumn Statement yesterday, the UK Chancellor, Philip Hammond, confirmed that proposed tax changes targeted at non-domiciled individuals that were first announced at the Summer Budget in 2015, will be going ahead with effect from 6 April 2017, as planned.

The changes include a new deemed UK domicile for non-domiciled individuals who have been resident in the UK for 15 out of the past 20 tax years.  Individuals who were born in the UK with a UK domicile of origin will also be treated as deemed domiciled immediately upon their return to the UK as tax residents.  A proposal for inheritance tax to be extended to UK residential property held by non-domiciled individuals through offshore companies and other similar entities, whether directly or through more complex structures, such as offshore trusts, is also to go ahead with effect from 6 April 2017.

Advisors and other respondents to the Government's two consultations on the proposed changes had strongly recommended that the proposed changes be delayed by a year in order to give time to consider how best to introduce the legislation.  This was particularly recommended in relation to the proposed inheritance tax changes, which were still at a very early stage of development in the summer and autumn of this year.  However, these calls have been ignored, and we anticipate that draft legislation to introduce the measures will be published on 5 December 2016.

If you have been resident in the UK for a number of years, or if you were born here with a UK domicile of origin and are either living here now or considering returning to the UK in the future, we would recommend that you take advice as soon as possible as to how the proposed deemed domicile changes may affect you, your family and any non-UK resident trusts of which you may be the settlor or a beneficiary. 

With regard to the proposed inheritance tax changes for UK residential property, if you are considering re-organising an existing structure, there is limited time between now and April 2017 to decide how best to proceed and to put in place the necessary practical steps to effect the re-organisation.  This is particularly the case if it is likely that it will be necessary to liquidate an offshore company or wind up a trust, or both. 

Similarly, if you are considering a new acquisition of UK residential property, it would be sensible to take advice now as to how best to hold that property for the future.

If you would like to discuss any of the points mentioned above, please speak to your usual contact in our Private Capital team.


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