Domiciled? Non Domiciled? New guidance on April 2017 domicile changes

From 6 April 2017, all non-UK domiciliaries who have been resident in the UK for 15 out of the previous 20 years will be deemed the UK domiciled for all taxes. Previously, deemed domicile only applied to inheritance tax and that was after 17 out of 20 years resident in the UK.

Anybody born in the UK with a UK domicile of origin will be treated as UK domiciled as soon as they return and become resident in the UK, even if they have acquired a domicile of choice elsewhere.

The change in the domicile status of former non-UK domiciliaries not only affects income and gains, which are now taxed on an arising basis but also has an impact on accumulated income and gains from prior years which have not been subject to UK tax. Provisions have been introduced to smooth the transition, including the ability to cleanse mixed funds within a fixed two-year window. This means that funds made up of a mix of income, gains, and original capital can be cleansed to give a pot of capital that can be remitted to the UK without a tax charge and a pot of income and gains that would trigger a tax charge if remitted.

There is also an impact on any offshore trusts set up while the settlor was non-UK domiciled. Without protection, the settlor would become liable for all the income and gains in the trust on an arising basis, but provided the gains and foreign source income remain within the trust there will be no tax charge for a protected settlement.


HMRC Guidance

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