The provisions which have been left out of the Finance Bill include:
- the new deemed domicile rule which provides that a non-dom will be treated as UK domiciled, for all tax purposes, in a tax year if he has been resident for at least 15 of the last 20 tax years;
- the new deemed domicile rule which provides that a non-dom who was born in the UK with a UK domicile of origin will be treated as UK domiciled for income tax and capital gains tax purposes in any tax year in which she is UK resident, and will be treated as UK domiciled for inheritance tax purposes after one year of tax residence;
- the rebasing relief, and segregation of mixed offshore funds relief, for certain non-doms;
- the introduction of inheritance tax (IHT) on UK residential property interests held indirectly by non-UK domiciled individuals (e.g. through a non-UK company), and on certain related loans;
- the “recycling” rule for trust distributions (although this was not included in the previous draft of the Finance Bill).
As things stand, non-doms who thought they had become UK deemed domiciled for all tax purposes on 6 April 2017 and planned on that basis are, now, still non-UK domiciled.
Many non-doms have re-structured existing trusts, and UK residential property holding structures, in anticipation of the new rules. If the rules do not now come into force with effect from 6 April 2017 these non-doms may need to consider their position further. On the other hand, non-doms who have not yet planned for the changes may now have more time to do so.
However, the omission of these provisions from the Bill does not mean that these measures have been dropped, or that their effective date will be changed. No political party has given any indication that changes to the taxation of non-doms is off the agenda. It does however mean that it is unclear when these rules will be effective from, be that 6 April 2017, or from a later date after the election, or 6 April 2018 (or not!).
At this stage, non-doms should continue to plan on the basis that the anticipated changes will be introduced from 6 April 2017, but may wish to consider what the positon would be if the effective date for these new rules were deferred.
A further update will be provided once the Bill has received Royal Assent.
If you require any advice on what steps, if any, you should be taking, or avoiding taking, please contact us.