Non dom tax changes (4) – Former domiciled resident – a tax pariah?


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Non dom tax changes: Former domiciled residents –  a tax pariah?


Updated for Finance Bill 2017

The non dom tax changes create a specific type of individual known as the ‘former’ or ‘returning’ domiciled resident (“FDR”).

However, it is not a club that one would particularly want to join. Such individuals will almost immediately have all the tax benefits of being a non dom removed.

So who is in this unenviable class? Membership is restricted to those who:

  • Were born in the UK
  • Have a Domicile of Origin in the UK (even if a domicile of choice elsewhere); and
  • Are now resident in the UK

If one finds oneself within this definition then what are the consequences?


No remittance basis

First of all, one cannot take advantage of the remittance basis of taxation regardless of whether one has been in the UK for the required 15/20 tax years or not. You will just be taxed on an arising basis.

No benefit from excluded property after one year grace period

Even where one has established an excluded property trust whilst non-domiciled and perhaps even non-resident then that status will be stripped away on return to the UK.

The status is stripped away after allowing a grace period of one year’s residence.

As such, this is a significant drawback where such a person has invested time and money in structuring their affairs before returning to the UK.

No rebasing

The non dom tax changes introduced a rebasing relief as set out in an earlier note. However, FDR’s have no opportunity to benefit from this rebasing relief.

As such, they may be best advised to consider whether they can affect an ‘informal’ rebasing by, say, a sale to a friendly structure.

No access to mixed funds temporary window        

Such an individual will not be able to avail themselves of what, is in theory, an attractive opportunity to separate out mixed funds.

No access to Protected Trust Relief 

Again, such a person cannot benefit from the protected trust reliefs which will apply for trusts where the trust would otherwise be prejudiced by the deemed provisions for income tax and capital gains tax. This means an FDR with a trust is likely to be at the ravages of the anti-avoidance provisions.

So, as you can see, the non dom tax changes creates a special club that no taxpayer will want to be a member of!

If you or any of your clients have any queries about these changes then please get in touch


Articles in this series:

Part one: Setting the scene and what is domicile?

Part two: The income tax and CGT changes (including rebasing, mixed fund rules and Business Investment Relief)

Part three: The Inheritance Tax (“IHT”) changes (including revisions to excluded property)

Part four: Returning non-doms – a tax pariah?

Part five: The changes in relation to trusts

Part six: A summary of actions and planning ideas

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