Am I non-UK domiciled (non-dom)?
Many foreign nationals living in the UK have non-UK domicile (“non-dom”) status for tax purposes. In the right circumstances non-dom status is advantageous for UK taxpayers.
In particular, a non-dom is able to claim the “remittance basis” of taxation. Overseas income and gains are then only taxed if they are “remitted” to the UK. “Remitted” here includes most ways in which foreign income or gains are brought to, used in or received in the UK.
In addition a non-dom expatriate employee is able to shelter non UK workdays from UK tax in the first three years they reside in the UK. This is a valuable tax relief and requires careful planning.
Claiming the remittance basis results in the loss of certain tax allowances, but these are often not relevant to a non-dom’s situation. Therefore, with careful planning, non-dom status can often protect foreign income and gains from UK tax.
- For non-doms who have been resident in the UK in at least 7 out of the last 9 tax years, a £30,000 “remittance basis charge” is payable to access the remittance basis.
- This charge increases to £60,000 for non-doms who have been UK resident in some part of 12 or more of the last 14 tax years.
- Since 6 April 2017, non-doms who have been UK tax resident in at least 15 of the last 20 UK tax years will be treated as domiciled (“deemed domiciled”) in the UK. They will then no longer be able to claim the remittance basis and must declare worldwide income and gains on an arising basis.
Non-doms can decide annually whether to claim the remittance basis, which is helpful given the charges as above. A remittance basis claim is not economic in all cases, particularly where the remittance basis charge applies.
It may be possible to structure investments so that income or gains are protected from UK without claiming the remittance basis. This is particularly relevant for those who are liable to the remittance basis charge, or approaching “deemed domicile” status.
It may also be necessary to remit income and gains from offshore into the UK, often to buy a UK property or to fund other spending in the UK. Careful planning is needed here to ensure that a remittance of funds to the UK is as tax-efficient as possible.
Non-domicile status can also have inheritance tax advantages, as a non-dom is only liable to inheritance tax on UK assets. UK domiciled or deemed domiciled individuals are instead liable to inheritance tax on worldwide assets.
Inheritance tax planning can therefore be important, particularly as a non-dom approaches being deemed domiciled in the UK. It is possible for a non-dom to ‘lock-in’ inheritance protection by setting up an ‘excluded property trust’. A trust may also offer wider income tax and Capital Gains Tax ("CGT") applies in certain cases when an asset is sold for more than it was originally purchased. The taxable gain (profit) may be triggered following the transfer of an asset, although commonly this would follow a sale. A number of tax reliefs are available to exempt or reduce the tax that may apply. Basic tax planning may... protection, and trust planning is a valuable option for many non-doms.
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
- Making overseas workday relief claims
- Making detached duty relief claims
- 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.