The Chancellor has confirmed that the heavily-trailed deemed domicile concept from 6 April 2017 will be included in Finance Act 2017 while inheritance tax (IHT) liability kicks in and a review of corporation tax for non-resident companies will be conducted
On the domicile issue, from April essentially a non-UK domiciled individual (non dom) will be classed as deemed domicile if they have been UK resident for 15 of the past 20 years. In addition, where an individual is born in the UK with a UK domicile of origin but has acquired a domicile of choice elsewhere they will be deemed UK domiciled for so long as they are UK resident.
From April 2017, IHT will be charged on all UK residential property, even where it is held by a non-domiciliary via an offshore structure.
Previously interests of less than 1% of the total value of an underlying company or partnership would be disregarded for IHT purposes but this de minimis has now been increased to 5% which is more meaningful.
Mercer & Hole director Alison Palmer said: ‘The main part of the legislation was issued in December 2016 but further developments have now been published in response to the consultations on the original draft and there have been some positive movements.
‘Following the consultation responses to capital gains tax (CGT) rebasing, it has been confirmed that offshore funds can be rebased in the same way as direct investments which is a welcome relaxation.’
The rules on domicile will be as stated in the published draft Finance Bill clauses but, following consultation, non doms will be able to segregate amounts of income, gains and capital within their overseas mixed funds for the years 2007 and 2008 as well as for subsequent years.
Non-resident companies are currently outside of the UK corporation tax regime. They do pay income tax on UK source income (such as rental profits). They can also be subject to non-resident capital taxes.
The government has also announced plans to consult on whether to bring these companies fully within the corporation tax regime.