More changes afoot for UK non-doms
Key developments on the taxation changes affecting UK resident non-UK domiciled individuals from 6 April 2017.
A number of helpful changes were announced on 5 December 2016 including an extension from one tax year to two of the period for segregating non-doms’ offshore bank accounts containing capital, gains and income into separate accounts to enable tax efficient remittances to the UK. Less helpfully, where gains on assets are subject to income tax are held it will no longer possible for them to be rebased from 6 April 2017.
Liability to income tax and CGT will arise only to the extent that benefits are received from an offshore trust. Any payments made to a close family member from April 2017 that is matched to existing income or gains of the trust will be taxed on the settlor unless the recipient is taxed personally.
It will no longer be possible to ‘wash out’ capital gains from offshore trusts after 6 April 2017 by making payments to non-UK resident beneficiaries, except in the year that a trust is wound up. ‘Recycling’ rules will prevent a non-UK resident beneficiary from receiving a benefit from the trust and then giving or lending it to a UK-resident beneficiary within the following three years.
From 6 April 2017, shares in non-UK companies will be subject to inheritance tax (IHT) charges to the extent that their value derives from UK residential property. While all debts will be allowed as a deduction on a pro rata basis, the loans – or any collateral or security for them – may be within the scope of IHT in the hands of the lender.
There will also be some helpful changes to encourage the take-up of Business Investment Relief.
Individuals and trustees should consider the implications and what their next steps should be as, for some nondoms, these are the most significant changes in UK taxation since the current rules were introduced in 2008.
For more information, contact:
Smith & Williamson, UK
T: +44 (0)1722 431 044