UK: Silver Lining In Non-Dom Reforms?

For those who will become UK deemed domiciled for income and gains tax purposes on 6 April 2017 under the 15/20 test1, the Consultation Document of 19 August 2016 contained some welcome good news. Not only will there be an opportunity to rebase assets that are held directly to their 5 April 2017 market value but such individuals can also take advantage of the opportunity to 'cleanse' accounts that constitute a mixture of capital, income and gains in order to increase the funds that can be remitted to the UK tax-free.    


The opportunity to rebase is only available if the following conditions are met:

  • The assets were foreign situs (so, non-UK assets) on 8 July 2015;
  • The assets were held directly on 8 July 2015; and
  • The individual paid the remittance basis charge in any tax year before the 2017/2018 tax year.

The last condition may present an issue for US taxpayers who would normally choose not to pay the remittance basis charge. However, it may be worthwhile paying the £60,000 or £90,000 charge for tax year 2015/16 or 2016/17 in order to take advantage of the rebasing opportunity, if latent gains are large enough.

For those who claimed the remittance basis in the past, it should be noted that rebasing does not necessarily mean that sale proceeds can be brought to the UK tax-free. The source of funds used to purchase an asset needs to be considered. It is only if the asset was purchased using funds already taxed in the UK or 'clean capital' that the proceeds can be brought to the UK without triggering a taxable remittance. However, if foreign income or gains were used as part or all of the purchase monies, then the usual remittance rules would apply to determine to what extent a tax charge would be triggered on bringing the proceeds of sale to the UK. However, the opportunity to cleanse mixed funds during 2017/18, as discussed further below, can be used to separate the proceeds into constituent parts to enable the capital part to be brought to the UK tax free.

The draft legislation which will hopefully clarify the mechanics of the rebasing is promised on 5 December 2016. The Consultation Document does, however, describe it as applying on an 'asset by asset' basis. For those who have assets that can benefit from rebasing, it may be beneficial to hold on to those assets until 6 April 2017 depending of course on investment considerations.


To encourage repatriation of funds to the UK, the Government has decided that during tax year 6 April 2017 – 5 April 2018 there will be a one-time window to separate mixed funds (funds that contain a mix of one or more of capital, gains and income) into their different constituent parts. This effective suspension of the mixed fund rules allows individuals to move the part of a mixed fund that represents clean capital to a separate account, giving them the opportunity to remit funds from this account to the UK tax-free not only in 2017/18 but in future tax years. This is a great opportunity to increase the pot of funds that can be remitted to the UK tax-free, provided that the relevant records are available.

This opportunity is not restricted to those who become deemed domiciled on 6 April 2017 and appears to be available to any 'non-dom' whether UK resident or not (except those born in the UK with a UK domicile of origin). If any mistakes have been made in the past in relation to keeping income separate from capital in periods of UK residence, then these can be rectified by taking the opportunity to transfer the income to a separate account in 2017/18. The provisos on the ability to cleanse are:

  • Cleansing will not be allowed if an individual is unable to determine the component parts of the mixed fund. The exact extent of records that would be needed is not yet known but it would be contrary to the aim of the cleansing opportunity for HMRC to be too draconian with record requirements. It is likely to be sufficient for an individual to be able to identify the source of the mixed funds in order to give a credible explanation of the rationale for the break-down of the mixed funds into its constituent parts.
  • Cleansing will only apply to bank deposits or similar. It will not apply to an asset that represents a mixed fund, although if that asset is sold, the cleansing opportunity can be used to separate the proceeds into constituent parts.


Taken together the rebasing and cleansing opportunities could be very useful to lessen the impact of the prospect of being subject to UK tax on an arising basis for the first time on 6 April 2017 and/or for those who are considering establishing a UK tax resident investment holding company in order to benefit from the relatively2 low UK corporation tax rate (20% currently due to fall to 17% in 2020). For the investment holding company, given that a check-the-box election would need to be made to make the company transparent for US income tax purposes (in order to avoid tax issues associated with the company being a PFIC), the tax issues arising from the underlying investments would need to be carefully considered, as they would for directly owned investments. However, the ability to rebase assets prior to the transfer to the company and/or to fund the company with funds that are clean for UK tax purposes post cleansing, increases the attractiveness of the proposal.   


1. resident in the UK in 15 out of the past 20 years

2. as compared to the higher personal tax rates

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Charles Russell Speechlys LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Akin Gump Strauss Hauer & Feld LLP
Charles Russell Speechlys LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions