There are to be major changes to the way non-domiciled (non-dom) individuals that live in the UK are taxed.
This guide summarises the proposals made in the Summer Budget 2015. On 30 September 2015 HMRC launched a consultation containing more details. See Reforms to the taxation of non-domiciles: HMRC consultation.
Non-dom status
- The permanent non-dom status for UK resident individuals is being abolished from April 2017.
- From 2017/18, any non-dom who has been resident for more than 15 of the past 20 tax years will become deemed domiciled for all UK taxes.
- Previously deemed domicile status was only applicable to Inheritance Tax (IHT).
Access to the Remittance Basis
The change to permanent non-dom status will limit how long the remittance basis can be accessed to 15 years. Individuals will still need to pay the £30,000 and £60,000 charges after seven and twelve years; however the £90,000 charge after 17 years residence will be redundant.
Leaving the UK
- Once deemed domiciled, an individual will need to be non-resident for at least six tax years to lose this status (this was five years however the number increased prior to consultation).
- In practical terms this will only be relevant for IHT purposes and so the required period of non-residence to escape UK IHT increases to six years.
- This rule will also apply to UK domiciled individuals who permanently leave the UK and establish a domicile of choice elsewhere.
Returning UK-doms
A new rule will be introduced affecting those who have a UK domicile at birth, but subsequently leave and acquire a domicile of choice. The Government is concerned that some of these individuals then return to live in the UK, and continue to claim non-dom status because for example the stay is not intended to be permanent.
From April 2017, a returning UK-dom will acquire a UK domiciled status for tax purposes as soon as they acquire a UK residence, regardless of their intentions. This will mean:
- They will not be able to access the remittance basis.
- They will be subject to IHT on their worldwide estate should they die whilst resident in the UK.
- Any offshore structures such as excluded property trusts will not be effective during the period of residence.
Leaving again
If the person subsequently leaves the UK again, exactly when they then lose this domicile status depends on the how long they were resident and whether an actual UK domicile (under general law) has been acquired. This can be up to five years after the year of departure.