Where are we up to and what action can be taken now?
HM Revenue & Customs published a consultation document setting out its proposed reforms to the taxation of non-UK domiciliaries in September 2015 and legislation will be published in 2017. Until then the position is uncertain, but HMRC has confirmed certain matters which may allow some taxpayers to act now before the new rules are introduced. Such action could present long-term tax benefits.
The potential benefits
If you anticipate becoming deemed UK-domiciled under the new regime from 6 April 2017, now is the time to act in order to benefit from an offshore trust structure. If you set up an offshore trust now (i.e. before you become deemed UK-domiciled under the new regime) you should not be taxed on foreign income and/or chargeable gains which are retained in the trust. Furthermore, the trust should also provide an effective shelter from UK inheritance tax (even if you subsequently become UK deemed domiciled under the new regime in the future).
There are, of course, certain asset types that would need to be excluded, such as UK residential property. However, an effective deferral of income and capital gains tax could potentially be achieved with the added benefit of protection from UK inheritance tax.
Timing is crucial. If you anticipate becoming deemed UK-domiciled under the new regime, steps to establish an offshore trust in order to potentially benefit from tax savings must be taken before the new rules are introduced. Taxpayers in these circumstances should act now to establish their offshore structure.
For more information, contact:
Abacus Trust Company Limited, Isle of Man
T: +44 (0)1624 689608
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