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March 16, 2016
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Inheritance Tax Changes for Non-Domiciles

Proposed changes within the Finance Bill 2016 will see the Inheritance Tax rules for non-domiciled individuals aligned with the Long Term Residence Rule announced in the Summer Budget 2015.

The Bill is expected to be published on Thursday 24 March 2016.

Long Term Residence Rule

Changes in the Summer Budget 2015 mean that non-dom individuals who have been resident in the UK for 15 out of the last 20 years will be deemed to be domiciled in the UK for all tax purposes.

These new rules are retrospective and will apply from 6 April 2017 to non-dom individuals who are UK resident.

Further detail on this change and others in the Summer Budget 2015 can be found in our previous blog post here.

Inheritance Tax Changes

Currently, non-dom individuals are deemed to be domiciled in the UK for Inheritance Tax purposes if they have been resident in the UK for 17 out of the last 20 years.

The changes within the Finance Bill 2016 will bring the Inheritance Tax position of non-dom individuals in line with the new rules outlined in the Summer Budget 2015.

Non-dom individuals will be deemed to be domiciled in the UK for the purposes of Inheritance Tax if:

  • They have been resident in the UK for 15 out of the last 20 tax years, or
  • They acquired their foreign domiciliary by choice, have returned to the UK, were originally born and domiciled in the UK, and have been resident in the UK for one out of the last two tax years.

There will be no changes to the treatment of trust assets where the trust is settled by a non-dom individual who is long term UK resident; foreign assets of the trust continue to be excluded and UK assets remain chargeable.

For non-dom settlors who were born in the UK with a UK domicile, however, foreign property they settle into a trust whilst domiciled abroad will no longer be excluded property as long as they are resident in the UK.

Contact us today to discuss your tax requirements.
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