Whatever happens after the election, there will be some changes to the non-dom regime. Neither we, nor the politicians, know what they will be. We would advise against knee-jerk reactions, but in the calm before the storm, we look at what we know so far, when changes might be introduced, and what longer terms options […]
EXPERT LEGAL INSIGHTS / Articles tagged "non-doms"
The 2015 Budget included the following measures of particular interest to private clients:
– deeds of variation – a review of their use will be launched in the Autumn
– disclosure facilities – the UK’s existing disclosure facilities will close early
– restrictions to Entrepreneurs’ Relief
In addition the Budget documents confirm which measures (including those which were announced at the time of the Autumn Statement or earlier) will be introduced before the election and which measures will be held over until the next Parliament.
In today’s pre-election Autumn Statement the Chancellor introduced a major change to the Stamp Duty Land Tax regime, but there were few other significant changes for high net worth individuals. Non doms are faced with another increase in the remittance basis charge.
UK Revenue changes position on foreign income/gains used as collateral for loans by non-domiciled remittance basis users
The UK Revenue has, with immediate effect, changed its position on the taxation of non-doms using foreign income/gains as collateral for borrowings used in the UK. From 4 August 2014 using foreign income/gains in this way will result in a taxable remittance.
Changes have been recommended to the Tier 1 (Investor) visa, including:
– increasing the minimum £1 million investment threshold to £2 million;
– removing the ability to borrow the funds that the applicant is required to invest in the UK; and
– introducing a premium route which would offer a successful applicant indefinite leave to remain in the UK after 2 years.
Read this if you, or any of your clients, have a dual employment contract.
The UK Revenue has published draft legislation which will prevent the future use of dual employment contracts in most cases. From 6 April 2014, earnings from the overseas contract under dual contract arrangements, which would previously have been taxable on the remittance basis, will in most cases be taxable on the arising basis.
HMRC considers that using debt to buy assets that are not chargeable to inheritance tax allows scope for “two bites of the cherry”.
Finance Bill 2013 introduces provisions to counter this planning. The provisions restrict the set-off of borrowings if the borrowed money is used to buy assets which qualify for IHT relief. In particular, it has a significant impact on:
• non-UK domiciled individuals (and their trusts) who take out borrowings secured on UK assets to reduce their value for inheritance tax; and
• entrepreneurs using their houses as security for borrowings used in their businesses.
HMRC has proposed changes to the way in which inheritance tax charges on trusts are calculated. If enacted, the proposals will effectively mean an end to ‘pilot trusts’ (see below) and anyone who has established pilot trusts should review their planning. The proposed changes will impact on trustees, settlors and beneficiaries of trusts which are subject to UK inheritance tax, including trusts set up by non-UK domiciled settlors which hold UK assets.
Non-UK domiciled individuals will be able to elect to be treated as domiciled in the UK for inheritance tax (‘IHT’) purposes under provisions contained in the draft Finance Bill 2013, published in December 2012. Where an election is made, gifts made by a UK domiciled spouse to his non-UK domiciled spouse will be free from UK IHT.
Changes to the measure announced at the time of the 2013 Budget mean that lifetime gifts made within the seven years before death will now also be able to benefit from the full spouse exemption even if no election was in place at the time of the gifts.
Borrowings secured against properties reduce their value for inheritance tax purposes, with only the net value being taxable. Damian Bloom, Private Client partner discusses new restrictions on the set-off of debts, if the borrowed money is used to buy assets which qualify for inheritance tax relief, or is taken offshore by a non-UK domiciled individual. This will have a significant impact on entrepreneurs using their houses as security for borrowings used in their businesses, as well as non-domiciliaries putting in place inheritance tax planning.