Domicile - wherever you lay your hat?

Non-domiciliaries may have been deemed UK domiciled for all tax purposes since 6 April 2017, possibly without knowing it, under retrospective changes contained in the September Finance Bill.

When the measures were dropped from Finance Act 2017, there were calls to delay them until April 2018 to provide non-doms with some certainty on their status, but they have not been heeded. Non-doms will now become ‘deemed domiciled’ and lose the tax benefits of their status after they have been resident in the UK for at least 15 out of the previous 20 tax years.

How it works

A person who is deemed domiciled will generally be subject to income tax, capital gains tax (CGT) and inheritance tax (IHT) on the same basis as someone who is UK domiciled. Until 5 April 2017, deemed domicile status applied only to IHT and an individual had to be UK resident for 17 of the previous 20 tax years to be deemed UK domiciled.

People who were born in the UK with a UK domicile of origin and who return to the UK after obtaining a domicile of choice elsewhere are also now deemed domiciled.

Remittance basis taxpayers who become deemed UK domiciled under the new 15-year rule will be able to rebase their overseas assets to their market value at 5 April 2017. This means that any gains accruing up to 5 April 2017 will not be charged to CGT. Remittance basis taxpayers will also be able to rearrange their overseas mixed funds to allow them to segregate amounts of income, gains and capital within these funds so that they can remit capital (not liable to tax) ahead of income and gains.

Also from April 2017, IHT will be charged on UK residential property even when indirectly held by a non-dom through an offshore structure. This affects three categories of property: a closely held company, an interest in a partnership or the benefit of certain loans used to acquire, maintain or improve UK residential property. An interest of less than 5% in the structure is exempt.

Because the changes have been backdated, there is transitional relief for chargeable events that are reportable or would have interest accruing on unpaid IHT from a date on or before the end of the month after the date when the Act comes into force.

If you are affected by any of these changes then we can help you review your arrangements now.


This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The newsletter represents our understanding of law and HM Revenue & Customs practice as at 12 October 2017.


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