Lawyers acting for non-doms (non-domiciled individuals) have welcomed “hints” in the Chancellor’s Budget this week regarding the future taxation of offshore trusts.
On 6 April 2017, the government is due to introduce sweeping changes to the taxation of non-doms, including abolishing permanent non-dom status. Non-doms who have been resident in the UK for 15 out of the past 20 years will be deemed domiciled in the UK.
James Badcock, partner at Collyer Bristow, says: “We still have no detail, and we are told not to expect this until the process for drafting the 2017 Finance Bill is under way.
“The Budget does however contain some brief and very high level hints as to what can be expected for those non-doms who have been living in the UK for some time, who may already have offshore trust structures and who will be immediately hit by the 15 out of 20 year rule on 6 April 2017. It has been confirmed, that those who have established trusts before they become deemed domiciled, will not be taxed on income and gains which are realised within the trust and retained in the trust. The expectation is they will be taxed when they receive a distribution or benefit from the trust.”
“We have also been told that the non-UK assets of non-doms who become deemed domiciled in April 2017 will be up-based for capital gains tax purposes, meaning that they will not be taxed on latent historic gains, but only on any increase in value from April 2017. This is extremely positive news and is potentially beneficial to inward investment and spending.
“Currently a non-dom with a foreign asset with a low base cost is not incentivised to sell that asset and bring the proceeds to the UK due to the very large tax bill they might face.”
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