From 6 April 2017 any individual who has been resident in the UK for at least 15 of the past 20 tax years will be deemed UK domiciled for tax purposes.
The remittance basis of taxation will no longer be an option for anyone who is deemed domciled under these new rules. Their worldwide assets will be subject to UK income tax, 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... More and inheritance tax.
Under the new rules, unremitted income and gains of non-dom individuals that arose in years before the individual becomes deemed UK domiciled will still be taxed on the remittance basis.
Where an offshore bank account contains a mix of unremitted overseas income, gains and tax-free (clean) capital, the UK tax rules prescribe the order in which each element is deemed to be remitted, with income generally remitted first.
In order to ease transition into these new rules there will be a 12 month transition period from 6 April 2017 during which non-dom individuals can rearrange their mixed funds overseas to separate them into their constituent parts (e.g. tax free capital, income, gains) by moving them into separate accounts.
The intention is to provide certainty on how later remittances will be taxed and it is neccessary for the taxpayer to be able to evidence the analysis applied.
This transitional relief could prove to be very valuable for non-doms and should result in much needed inflows of capital into the UK economy.
Please contact us if you would like to discuss how the non-dom reform impacts your tax affairs and how we can assist with cleansing your offshore mixed funds.