Major reforms to tax treatment of non-UK domiciliaries

Andrew Cockman Andrew Cockman

Government provides draft road map for taxation changes of non-UK domiciliaries (non doms) coming into effect from 6 April 2017

The Summer 2015 Budget announced fundamental changes to the future taxation of non-UK domiciliaries (non doms).  Following subsequent consultation and discussions with stakeholders the government has released a further consultation document and accompanying draft legislation setting out how they propose to implement changes announced in the Summer 2015 Budget.

UK resident non doms who are either long term residents, or who have a "strong connection" with the UK by virtue of being born in the UK and having a domicile of origin here will become "deemed domiciled" for all tax purposes. These changes will come into effect from 6 April 2017 and will be legislated as part of the 2017 Finance Act.    

The newly released consultation develops these proposals further and introduces draft legislation on various areas. These include detailed rules as regards the operation of the deemed domicile rules, as well as the inheritance tax treatment of UK residential property. In addition, the draft legislation sets out new rules for the income tax and capital gains tax treatment of deemed doms as well as setting out certain protections for nonresident trusts. 

The government acknowledges that the draft legislation is not complete and excludes some issues which will be included in the Finance Bill 2017.  The new consultation also invites views on the ways in which Business Investment Relief could be changed to encourage greater investment from non doms into UK businesses. This is part of the government’s wider efforts to encourage inward investment in the UK and to encourage entrepreneurial activity in the UK.

The attached briefing paper examines the changes outlined by the government with particular focus on the following topics:

  • Deemed UK domicile for long-term residents
  • Transitional reliefs
  • Inheritance tax on UK residential property
  • Offshore trust protection
  • Encouraging non doms to invest

For further information, please contact Andrew Cockman, Director – National Tax Office.

Read the briefing paper