Plans by the UK government to treat any individual who has been resident in the UK for at least fifteen of the past twenty years as UK domiciled for tax purposes will come into effect from April 2017. The intention is to put an end to permanent non-dom status and compel individuals who have chosen to make the UK their long term residence pay the same tax as individuals who are UK domiciled.
Currently non-dom’s are liable to pay tax on all income and capital gains which arise in the UK, but can choose to pay tax in the UK on foreign income and capital gains if remitted to the UK. However, if you are living continuously in the UK for fifteen years you will be deemed domiciled in the UK and this option will not be available. Internationally mobile non-dom’s may not be effected if they are leaving the UK for extended periods of time as their non-dom status upon returning to the UK will run again for another fifteen years.
The Government has stated from the outset of these reforms that it intended there to be some protection for those individuals who had set up offshore trusts or underlying entities prior to becoming deemed UK domiciled. Offshore Trusts that are set up by individuals who are not domiciled in the UK will remain outside the scope for UK inheritance tax.
Experts have criticised the proposals due to lack of clarity, stating that it is ‘unhelpfully short on detail’.