Non-dom status abolished for 15 year residents

The abolition of non-dom status for long-term (15 year) residents is projected to raise £1.5bn but it remains to be seen at what cost to the UK.

The Chancellor’s Summer Budget announced plans for the most fundamental changes to the taxation of non-doms since those introduced in 2008.

From 6 April 2017 those who have been UK resident for more than 15 out of the previous 20 years will become ‘deemed domiciled’ for all UK personal taxes: they will be subject to income tax and capital gains tax on worldwide income and gains and UK inheritance tax on worldwide personal assets. 'From now on they will pay the same tax as everyone else' said the Chancellor. Those with a UK domicile at birth who acquire a domicile outside the UK by moving abroad, but subsequently come back, will also face UK taxes as if they had never left.

Other changes

The abolition of the permanent non-dom status is only one of the measures of the non-dom reform package: the government also proposes changes to the tax treatment of benefits, income and capital received from offshore trusts, again bringing long-term resident non-doms on the same footing with UK doms with asset-holding structures.

The announced changes are not as extreme as full abolition of non dom status proposed by the Labour Government prior to the UK election. The government has announced they will consult widely prior to the legislation being introduced from 6 April 2017.

Complexities

Leaving the UK on a temporary basis to restart one’s domicile clock will also become more difficult with the number of years being reviewed possibly aligning them at a minimum of five years.

These significant changes combined with further residential property changes also announced are likely to add to those wealthy non-doms leaving the UK.

The Chancellor stated in relation to non doms that 'simply abolishing non-status altogether, would, as Ed Balls correctly noted, probably cost the country money'. What the true effect of these changes will be is the great non-dom unknown: will the extra amount to be raised from those staying outweigh the loss from those going? The government is projecting that it will: with an expectation that £1.5bn of tax to be raised.

The precise impact of the measures will need to be evaluated later once more detail is available when the various consultations start in the Autumn.

If you have any queries on any of the above issues please contact Karen Clark or Gary Heynes to discuss further.