Considerable publicity has been given to the Labour Party's intention to review the laws on domicile and residence and this may have a significant impact on the planning opportunities open to individuals who, whilst being resident in the United Kingdom are domiciled outside. It can be expected that the changes are more likely to affect individuals who have been resident on a long-term basis. Whilst the election may be some months away, listed below are ideas which should be considered:-
1) Under current legislation, it is possible for persons domiciled outside the United Kingdom to establish an offshore trust, so that the property is excluded from United Kingdom inheritance tax, even if the person subsequently becomes domiciled in the United Kingdom and is also a beneficiary of the trust.
2) The longer a person remains a resident of the United Kingdom, the more likely the Inland Revenue are to attack non-domicile status. Thought should be given to any measures which should be taken to strengthen current domicile position. Statements previously provided to the Revenue should be closely examined.
3) There continues to be capital gains tax advantages for establishing offshore trusts, even if an individual is deemed domiciled for inheritance tax purposes in the U.K. after having been resident for seventeen out of the last twenty years. If such an individual personally realises a gain on an overseas asset, any remittance of any part of the proceeds of sale will normally give rise to a United Kingdom capital gains tax charge. This contrasts to the position of an offshore trust where gains realised by trustees can be remitted to the United Kingdom tax free.
4) Placing assets in trust can also be linked with inheritance tax planning for persons domiciled in the United Kingdom, if they are prepared to relinquish the benefit of those assets by placing them in trust for children or other beneficiaries.
Advice should be sought from your tax adviser if you consider the opportunities are relevant to your personal circumstances.
This article provides a general outline on the subject at the time of writing. It is not intended to be exhaustive nor to provide legal advice in relation to any particular situation and should not be acted on or relied upon without taking specific advice.
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