The UK Finance Bill 2017 passed through the House of Commons on Tuesday 25 April 2017 with a large number of its original provisions missing. Among the changes that did not make the cut are those relating to the new deemed domicile rules for non-domiciled individuals and also the inheritance tax (IHT) charge on UK residential property held by such individuals, or their offshore trusts, through overseas entities. Both of these changes were intended to have taken effect from 6 April 2017.
The provisions were dropped as a result of the need to pass the Finance Bill quickly before Parliament is dissolved in advance of the forthcoming General Election on 8 June 2017. We understand that the Government and the Opposition agreed to the omission of large sections of the proposed legislation to avoid complex and, in some cases, controversial provisions passing into law without proper parliamentary scrutiny.
Potential implications for non-doms
As yet, it is unclear how or whether the omission from the Finance Bill of the relevant non-dom related provisions will affect the date from which the deemed domicile rules and those relating to IHT on residential property will come into effect. Over the last few months, many people have entered into major restructuring exercises or even moved to another country in order to be ready for the changes that we understood would come into effect on 6 April 2017.
What is their position, and the position of people who perhaps did not have time to make the changes they would like to have made before the 6 April deadline? Will they now have a respite period to review their affairs before the changes come into effect?
While nothing is yet clear, it seems likely that the legislation that is being postponed now will be included in a future Finance Bill following the General Election. We understand that this is likely to be the case whoever comes into power and, given that there will now be a Budget in the autumn, will allow for it to undergo appropriate parliamentary debate and scrutiny before the end of this tax year.
While it is not impossible that the start date for the new non-dom legislation could be 6 April 2018, it is quite likely that the provisions that were to have been included in the Finance Bill will be introduced with retrospective effect to 6 April 2017. While retrospective legislation is generally frowned upon, it may be considered that it is justifiable in this case as, until today, everyone has been proceeding on the basis that they are already in effect.
As soon as we have more information on what the Government is proposing in this regard, and whether there may be a further period available for non-domiciled individuals and their trustees to plan and restructure where appropriate, we will be in touch further.