Effective from 6th April 2017, changes outlined in the Finance Bill 2017 will have a huge impact on non-UK domiciled (non-dom) individuals. The proposals state that people who have resided in the UK for 15 of the last 20 years will be ‘deemed’ UK domiciled and therefore will be liable to pay tax on their non-UK income, be subject to capital gains tax (CGT) on UK and overseas assets, and will also be liable for inheritance tax (IHT).
The 15-year period can be counted over two or more periods of residency – a non-dom does not have to have lived in the UK for 15 consecutive years. However, once deemed UK domiciled, individuals who leave the UK but return after six tax years will start the 15-year period again.
In terms of CGT, when deemed domiciled, any gains made on the disposal of assets would be subject to taxation in the UK, regardless of whether this asset is in the UK or offshore. However, any gains made on assets prior to 6th April 2017 will not be taxed.
Finally, these changes will also impact IHT; once deemed UK domiciled, the taxpayer will be subject to UK IHT on both UK and offshore assets.
We expect this to have larger implications for the high net worth space and, therefore, the UK housing and financial markets, than anything else we’ve seen in the past few years. The more established non-doms whose children, and in some cases children’s children, have gone through schooling or university here and integrated fully into comminutes will begrudgingly accept these changes for now but seriously consider their long term plans with regards the UK. However, it is our opinion this will lead to investment into more favourable jurisdictions, such as Monaco.
Clients who wish to stay in the UK may need to restructure their UK property portfolio and our partnership with tax experts BDO enables us to put our clients in touch with experts in this field who can explain the intricacies of these changes. The launch of our Monaco office will also enable us to work with any clients who wish to invest further afield.