In his Autumn Statement yesterday, the UK Chancellor,
Philip Hammond, confirmed that proposed tax changes targeted at
non-domiciled individuals that were first announced at the Summer
Budget in 2015, will be going ahead with effect from 6 April 2017,
The changes include a new deemed UK domicile for non-domiciled
individuals who have been resident in the UK for 15 out of the past
20 tax years. Individuals who were born in the UK with a UK
domicile of origin will also be treated as deemed domiciled
immediately upon their return to the UK as tax residents. A
proposal for inheritance tax to be extended to UK residential
property held by non-domiciled individuals through offshore
companies and other similar entities, whether directly or through
more complex structures, such as offshore trusts, is also to go
ahead with effect from 6 April 2017.
Advisors and other respondents to the Government's two
consultations on the proposed changes had strongly recommended that
the proposed changes be delayed by a year in order to give time to
consider how best to introduce the legislation. This was
particularly recommended in relation to the proposed inheritance
tax changes, which were still at a very early stage of development
in the summer and autumn of this year. However, these calls
have been ignored, and we anticipate that draft legislation to
introduce the measures will be published on 5 December 2016.
If you have been resident in the UK for a number of years, or if
you were born here with a UK domicile of origin and are either
living here now or considering returning to the UK in the future,
we would recommend that you take advice as soon as possible as to
how the proposed deemed domicile changes may affect you, your
family and any non-UK resident trusts of which you may be the
settlor or a beneficiary.
With regard to the proposed inheritance tax changes for UK
residential property, if you are considering re-organising an
existing structure, there is limited time between now and April
2017 to decide how best to proceed and to put in place the
necessary practical steps to effect the re-organisation. This
is particularly the case if it is likely that it will be necessary
to liquidate an offshore company or wind up a trust, or
Similarly, if you are considering a new acquisition of UK
residential property, it would be sensible to take advice now as to
how best to hold that property for the future.
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.
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Under current law, where a business subject to corporation tax or income tax reallocates an existing asset into its trading stock, the basic rule is that there is a deemed market value disposal of the asset...
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