An individual’s liability to personal taxation in the UK depends largely on that person’s tax residence and domicile status, and on other factors such as the situs of assets (the place where they are located) and the source of income and capital gains. Broadly, an individual is domiciled in the jurisdiction which he regards as his homeland and many foreign nationals living in the UK will have a good case for claiming to be non-UK domiciled.

“Non-dom” status is generally favourable from a UK tax perspective. In particular, it allows you to opt into the “remittance basis” of taxation. In essence, this means that rather than paying UK tax on a worldwide basis, your overseas income and gains are only taxed in the UK if they are brought in to use in the UK. The terms “remit”, “remittance” etc. are very broad and include most ways in which cash or other assets are used or enjoyed in the UK, but careful planning can assist in this regard.

However, there is a cost associated with claiming the remittance basis as it results in the loss of certain tax allowances and, for those non-doms who have been resident in the UK for some part of at least 7 out of the last 9 tax years, there is a £30,000 “remittance basis charge” payable to access the remittance basis. From 6th April 2012, this charge will increase to £50,000 for non-doms who have been UK resident in some part of 12 or more of the last 14 tax years. Whether or not to claim the remittance basis is therefore an annual decision, and it may not make economic sense in some circumstances, especially where pre-planning has ensured that “offshore income” does not arise directly to the individual concerned.

It may also be the case that there is a particular need to bring offshore monies and assets into the UK, perhaps to buy a house of pay for other capital expenditure or to bridge a short-term need for extra income. As those assets are remitted here, so to is any gain or income attaching to them, which has arisen offshore whilst the individual non-dom has been resident in the UK. This tax charge can be a nasty surprise and with careful thought, can often be avoided.

Non-dom status also carries potential inheritance tax advantages, in particular the ability to set up an “excluded property trust” which can provide a permanent shelter from UK inheritance tax (IHT). This option falls away, however, once a non-dom has been UK resident for 17 of the last 20 tax years and becomes “deemed domiciled” for IHT purposes. Non-doms who have been resident in the UK for a number of years should therefore review their position and consider IHT planning opportunities before it becomes too late.

Our team are experienced in the taxation of non-domiciled individuals and can assist with a range of associated issues including:

• Assessing an individual’s residence and domicile position
• Completion of non-dom tax returns with associated disclosures etc.
• Advising on whether or not to claim the remittance basis in any given year
• Structuring offshore assets and bank accounts to maximise the benefit of non-dom status
• Pre-arrival planning for non-doms moving to the UK
• Planning for tax-efficient remittance of funds to the UK
• Analysing the implications of monies which have been remitted to the UK
• Inheritance tax and excluded property trust planning

Please contact us to speak to one of our specialists about any aspect of non-domicile taxation.