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For inheritance tax (“IHT”) purposes, the basic position is that non doms are only liable to IHTon UK assets. However, this beneficial position is changed where they have been resident in the UK for 15 out of 20 of the previous tax years.
Once he or she has been present in the UK for this time, then they will be deemed domiciled for all UK tax purposes, including IHT. The implication is that they will be subject to IHT on worldwide assets.
Prior to becoming deemed domiciled then one might look at creating ‘excluded property’ structures which ringfence assets – even UK ones – from being within the UK IHT net. A recent change means that UK residential property cannot benefit from this status.
For income tax and capital gains tax purposesa non dom, assuming that he or she is resident in the UK, will always be subject to income tax on UK income and gains on UK assets.
However, to begin with, he or she may be able to take advantage of the remittance basis of tax on foreign income and gains. Initially, this will come of right and free of charge and this will last until they have been resident in the UK for seven out of nine tax years. From such time, a taxpayer must then pay for this basis of taxation.
There is now a long stop date on this where the remittance basis of taxation is no longer available if they have been resident for 15 out of 20 tax years.
So what is the remittance basis of taxation? Essentially, this means that foreign income and gains will only be subject to UK tax where brought to, or used in, the UK.