After an initial consultation, HMRC have published their comments on the changes to the taxation of non-UK domiciliaries from 6 April 2017. Fortunately, after listening to the various professional bodies, they have decided to withdraw a proposed new system of taxation of offshore trusts and instead intend to utilise something similar to the existing rules.
For those individuals who will become deemed domiciled from 6 April 2017, it is beneficial for them to create an offshore settlement before 5 April 2017. There appears to be a protection for such settlements as they will offer an effective remittance basis of taxation. For capital gains tax this will be withdrawn entirely if they, their spouse or minor children ever actually benefit from the trust but the deferral can continue for income tax purposes. Whilst this is not as attractive as the current rules, it does still seem to offer a deferral mechanism for income and capital gains.
We will be writing to all of our clients in good time to consider the use of new offshore settlements, or tidying up existing settlements, where appropriate. We await the draft legislation as this will shed further light on these new proposals.
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