By Clare Munro, Tax Partner
The Treasury has published the long awaited consultation document setting out its plans for the reform of taxation of non-domiciliaries this week. The consultation confirms the intention to remove the benefits of ‘permanent non-dom status’, for income and capital gains purposes as well as inheritance tax.
The basis for the reform is that, once an individual has been tax resident for 15 years he becomes deemed UK domiciled and treated in the same way as an individual with a UK domicile. Recognising the compliance burdens for offshore structures in having to compile analyses of past income, the consultation suggests taxing deemed domiciles on any benefits that they receive from any offshore trusts or underlying companies.
For IHT purposes some protection is proposed: excluded property trusts set up by a non-UK domicile will retain the current level of protection in relation to their offshore assets. However, that will not extend to UK residential property, which will be subject to UK IHT under the proposals, even if held by an offshore trust and non-UK company.
Whilst the essence of these proposals was announced in the Summer Budget, the detail of what will be a fundamental change for our clients is only now becoming clear. The consultation closes on 11 November and we will be considering the proposals in more detail in the coming weeks.
To discuss how these issues could affect you, please email me.