Non-dom tax reforms resurface – but the 2019 deadline hasn’t changed

Re-introduction of non-domicile reforms means that taxpayers now have less time to sort out their affairs

The Government has confirmed that non-domicile reforms – which from the dropped from the Finance Bill – will go ahead as originally planned, effective from 6 April 2017.

Reforms include a transitional window of two years – running to 5 April 2019 – to reorganise overseas accounts. But all the governmental faffing means that affected taxpayers now have less time to take the necessary action, warns accountancy and tax advisory firm Blick Rothenberg.

Detailed guidance is still to come from HMRC, but here’s a quick outline of headline changes to non-dom rules:

  • Non-domiciled individuals who have been resident in the UK for 15 out of the previous 20 tax years as at 5 April 2017 will be “deemed domiciled” for all personal taxation purposes;
  • Individuals born in the UK with a UK domicile of origin, who established a non-UK domicile of choice, will not be able to benefit from the non-domicile taxation regime if they are UK resident and any overseas structures will not be afforded protection;
  • New rules providing certain protections to the taxation of offshore trusts established by non-domiciled individuals; and
  • Overseas structures owning UK residential property will come within the scope of UK inheritance tax.
  • In addition to the above, the 5 April 2017 rebasing and the opportunity to ‘cleanse’ mixed accounts will also take effect, as previously announced.

Nimesh Shah, Partner at Blick Rothenberg: “After the hard work to establish the draft legislation, it was unprecedented to then remove the provisions in the wake of the General Election announcement, in order to rush through the Finance Bill before Parliament was dissolved.

“The entire legislative process around the non-domicile reforms has been shambolic, since the original announcement by George Osborne two years ago. There have been constant delays leaving taxpayers uncertain about what action they needed to take, leaving important decisions to be made to the last minute.

“When the legislation was unexpectedly removed before the General Election, this meant an uncertain period for non-domiciled individuals on whether the action they had taken to plan for the changes could leave them out-of-pocket. It also meant that some taxpayers had put their plans on hold before taking any action.

“Because of the delay caused as a result of the legislation being removed before the election, the timeframe for effected individuals to take the necessary action is naturally shortened. The Government should have acknowledged this and extended the timeframe, ideally to 5 April 2020.

“Given the complexity of some of the workings of the new rules, the guidance from HMRC is much needed and needs to published as soon as possible so that individuals can start understanding what the new rules mean in reality for them and what practical action they should be taking.”

More details from HMRC here