Budget 2015 put a stop to many of the favourable tax rules for individuals who are currently treated as not domiciled in the UK. There still remains an advantage for the short-term residents (those who are resident here for less than 15 tax years) but the whole system for non-UK domiciliaries is generally being shaken up – and not in a good way.
Unhelpfully we don’t expect to receive the new legislation any time before 6 April 2017, when the new rules will take effect. Thus it does not give much time for such individuals to get their affairs in order. However announcements were made recently (hidden away in the most recent budget) which includes one welcome proposal. You need the bad news first to put the good news into context:
An individual who has a domicile of origin outside the UK, by law, will be treated for UK tax purposes as UK domiciled for all taxes after they have been UK resident for 15 years out of the last 20 years, on or after 6 April 2017.
The implications of this are that all income and gains arising on assets held by such an individual will be automatically assessable to tax on the arising basis. There will no longer be any ability to defer or avoid taxes by claiming the remittance basis of tax on overseas income or gains.
It appears however that there will an automatic rebasing of the values of non-UK situs assets for those individuals who become deemed domiciled on 5 April 2017. Whether this is extended to individuals who become domiciled at a later date is not clear but that would be the logical conclusion.
This seems to offer the ability to wash out the historical gains inherent in foreign assets for UK tax purposes that arose prior to becoming domiciled. It is unclear whether this exempts the historical gain up to 5 April 2017 – this is unlikely, as it is more favourable than the current rules! The more plausible understanding is that it is a final chance to attract the remittance basis on the gains prior to 5 April 2017.
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