Finance Bill 2017 will not include changes to the tax rules applying to non-doms and their offshore structures. The government had intended to introduce new rules with effect from 6 April 2017 to increase the tax take from non-doms.
To recap, the intended changes:
Deem individuals who have been UK tax resident for more than 15 out of the previous 20 years to be UK domiciled so they no longer qualify for the ‘remittance basis’ and become subject to income tax and capital gains tax on their personal worldwide income and gains. In addition, inheritance tax could become due on their worldwide assets.
Give protections to offshore trusts set up by such individuals from income tax, capital gains tax and inheritance tax where they meet the qualifying conditions.
Give non-doms who had claimed the remittance basis and paid the remittance basis charge an opportunity to ‘rebase’ the cost of their assets to their value at 5 April 2017.
Give non-doms the opportunity to ‘cleanse’ mixed funds so that clean capital could be identified.
Charge inheritance tax on UK properties held by non-doms and their trusts where those properties are held by overseas companies.
The changes were set out in Finance Bill 2017 and were intended to take effect from 6 April 2017.
The House of Commons has approved an early general election date of 8 June 2017 and Parliament will be dissolved on 3 May. This means that there is a much shorter time than usual for the Finance Bill to go through the appropriate stages of review and receive Royal Assent.
The selection of amendments for the Finance Bill committee stage debate today shows that the Government intends to remove the majority of the Finance Bill, including the non-dom changes set out above.
This U-turn means that trusts set up by non-doms prior to 5th April 2017 will protect the settlor from capital gains tax and Inheritance tax but will not shelter the income in an offshore trust in which a settlor can still benefit. In most circumstances a UK resident non-dom settlor will still need to claim the remittance basis and pay the remittance basis charge until the changes are brought in.
Non-doms who intended to fund their lifestyle in the UK by taking advantage of the rebasing election or the cleansing provisions will now need to wait until next year. This may mean that plans to sell rebased assets may now need to be deferred.
It is likely that these changes will return in a future Finance Bill, whatever the sitting government, and take effect from 6 April 2018.
Non-doms who had missed the earlier 5 April 2017 deadline to restructure their affairs ahead of the new rules coming into force now have time to do so. In particular, they should seek advice on:
Removing UK properties from corporate structures;
Setting up qualifying trusts before they become deemed domiciled; and
Other pre-deemed domicile planning.
Mark Davies, Jon Elphick & Priya Dutta, Mark Davies & Associates
Finance Bill 2017 will not include changes to the tax rules applying to non-doms and their offshore structures. The government had intended to introduce new rules with effect from 6 April 2017 to increase the tax take from non-doms.
To recap, the intended changes:
Deem individuals who have been UK tax resident for more than 15 out of the previous 20 years to be UK domiciled so they no longer qualify for the ‘remittance basis’ and become subject to income tax and capital gains tax on their personal worldwide income and gains. In addition, inheritance tax could become due on their worldwide assets.
Give protections to offshore trusts set up by such individuals from income tax, capital gains tax and inheritance tax where they meet the qualifying conditions.
Give non-doms who had claimed the remittance basis and paid the remittance basis charge an opportunity to ‘rebase’ the cost of their assets to their value at 5 April 2017.
Give non-doms the opportunity to ‘cleanse’ mixed funds so that clean capital could be identified.
Charge inheritance tax on UK properties held by non-doms and their trusts where those properties are held by overseas companies.
The changes were set out in Finance Bill 2017 and were intended to take effect from 6 April 2017.
The House of Commons has approved an early general election date of 8 June 2017 and Parliament will be dissolved on 3 May. This means that there is a much shorter time than usual for the Finance Bill to go through the appropriate stages of review and receive Royal Assent.
The selection of amendments for the Finance Bill committee stage debate today shows that the Government intends to remove the majority of the Finance Bill, including the non-dom changes set out above.
This U-turn means that trusts set up by non-doms prior to 5th April 2017 will protect the settlor from capital gains tax and Inheritance tax but will not shelter the income in an offshore trust in which a settlor can still benefit. In most circumstances a UK resident non-dom settlor will still need to claim the remittance basis and pay the remittance basis charge until the changes are brought in.
Non-doms who intended to fund their lifestyle in the UK by taking advantage of the rebasing election or the cleansing provisions will now need to wait until next year. This may mean that plans to sell rebased assets may now need to be deferred.
It is likely that these changes will return in a future Finance Bill, whatever the sitting government, and take effect from 6 April 2018.
Non-doms who had missed the earlier 5 April 2017 deadline to restructure their affairs ahead of the new rules coming into force now have time to do so. In particular, they should seek advice on:
Removing UK properties from corporate structures;
Setting up qualifying trusts before they become deemed domiciled; and
Other pre-deemed domicile planning.
Mark Davies, Jon Elphick & Priya Dutta, Mark Davies & Associates
