Significant changes took effect from 6 April 2017 that reduced the ‘non-dom’ tax advantages of being non-UK domiciled and the length of time those advantages could be obtained. However, being a non-dom is still a highly beneficial tax status for many reasons. At ETC Tax, we have significant experience of advising non-UK domiciled individuals on all aspects of non-dom taxation.
Non-domiciled individuals can potentially enjoy favourable tax treatment through the remittance basis of taxation. Careful planning is essential to ensure that a remittance of funds to the UK is as tax efficient as possible.
Inheritance tax planning is valuable for non-dom individuals. Options could include locking in inheritance tax protection through an excluded property trust. Our tax experts will tailor their advice to reflect your specific circumstances.
We can offer support in respect of the completion of non-dom tax returns with associated disclosures, advising on whether or not to claim the remittance basis in any given year and making overseas workday relief claims.
Domicile – Every individual must have a domicile, albeit this may change during their lifetime and this is usually what they consider to be their permanent home. It is a concept of general international law and these rules apply for tax purposes.
There are three types of domicile:
Domicile is a completely separate term from citizenship and residence and should be reviewed in isolation.
Watch videoFrom the 6 April, 2017, non-domiciled individuals that have been resident in the UK for at least 15 of the last 20 tax years will be considered to be deemed domiciled in the UK. This means that they will no longer be able to make use of the remittance basis of taxation and will be subject to UK tax on their worldwide income.
The 15 of 20 tax years also applies when considering UK inheritance tax. Non-domiciled individuals are only within the scope of UK IHT on UK situs assets and certain foreign assets that derive value from UK residential property. Individuals that are deemed domiciled are within the scope of UK IHT on their worldwide assets.
There are special rules for those born with a domicile of origin in the UK, subsequently moved from the UK and then returned at a later date.
Nom domiciled individuals can choose whether to file their tax return on the arising or remittance basis of taxation. The individual has the flexibility to choose each year which method they wish to file.
The arising basis means that their worldwide income is subject to UK tax (although foreign tax credits may be claimed if overseas tax has also been paid). The advantage of this the individual will be entitled to a UK personal allowance and they will not be restricted when bringing overseas funds into the UK.
The remittance basis allows individuals to exclude their overseas income from UK taxation and can be extremely valuable to those non-doms with significant wealth overseas. This is on the basis that the foreign income or gains are not bought into the UK. Individuals will lose their personal allowance and may be subject to higher UK tax charges if the income is bought into the UK at a later date. There is also a remittance basis charge for those who have been resident in the UK for 7 of the previous 9 tax years (£30,000) and this is increased for those who have been resident in the UK for 12 of the last 14 tax years (£60,000).
For a remittance to arise, overseas funds that have previously been excluded from UK taxation is bought into the UK via property, money, or consideration for a service.
While restrictions apply for bringing overseas funds to the UK without a tax charge arising, effective non-domicile tax planning can be used to ensure remittance to the UK do not trigger a UK tax charge through structuring offshore investments and accounts to segregate income from capital.
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