"It’s worth mortgage brokers understanding what the proposed changes are, because if they do go ahead, they may have a significant impact on their non-dom clients."
On April 6th this year a new set of rules were going to be implemented regarding the taxation of so called non-doms. These changes were outlined in the Chancellors Spring Budget on 8th March 2017, but have been excluded from the Finance Bill 2017 due to limited time availability to debate the Bill before the general election.
So that’s that, then? Unfortunately no; it’s not that simple.
The delay has caused considerable consternation for non-doms, who don’t know whether the proposed changes are being deferred, or subject to future amendments or whether they will be dropped altogether. It is also unclear, if the changes are eventually implemented, whether they will be effective from April 2017 or deferred to April 2018.
For brokers with non-dom clients, these are confusing times and some may decide all they can do is wait and see what eventually transpires following the election. Others will have clients that may see this as an opportunity to undertake a restructure of their affairs.
However at the time or writing, the Tories seem to be in a strong position and there is every possibility therefore that if re-elected, are likely to take steps to implement the excluded items from the 2017 Finance Bill.
It’s worth mortgage brokers understanding what the proposed changes are, because if they do go ahead, they may have a significant impact on their non-dom clients.
The proposed changes
At the moment, non-doms are able to choose to be taxed using either the ‘arising’ or ‘remittance’ method of taxation each year, subject to paying the appropriate annual charge. Those that are resident in the UK for 17 out of the last 20 years become deemed UK domiciled in respect of inheritance tax purposes only.
However, under the new proposals, the deemed domicile 17 out of 20 years rule would reduce to 15 out of 20 years and extend to all taxes including income and capital gains and not just inheritance tax. This would effectively stop the remittance basis being available for long term non doms.
Treatment of offshore structures & inheritance tax
From a UK property ownership perspective, a further important proposal was that if the property is held in an offshore company, regardless of whether the shares are held personally or via a trust or foundation, the individual will no-longer escape a UK inheritance tax charge on the UK residential property.
Returning to the UK
It was also being proposed that people who were born in the UK with a UK domicile of origin and who acquired a non UK domicile after leaving the UK will be treated as UK domiciled, if they return to the UK.
Change or no change?
Whether these proposals will be enacted as part of a rejuvenated Finance Bill after the election, only time will tell. However, it’s worth keeping a careful watch on what happens to the Finance Bill after the election takes place and keeping your clients updated.