Non-domicile changes: What next?

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The non-dom reform has been ongoing since 2008 and shows no signs of stopping, no matter what successive governments say.

The latest round of consultation (released in August 2016) included some draft legislation, but there remain significant details to be ironed out later in the year.

Should you do anything now?

Absolutely. Although the position is still somewhat in flux, the majority of the new rules have been outlined sufficiently for us to understand where the government intends to go with the changes.

People are already seeking advice and getting their plans in place; leaving your queries until after Christmas is not an option given the likely flood of activity then.

What are the issues?

  • New deemed domicile rules
  • Rebasing option
  • Mixed funds clean up
  • UK residential property structures

Deemed Domicile

Currently an individual will become deemed domicile for Inheritance Tax (IHT) if they have been in the UK for 17 of 20 years. This will change from April 2017 such that individuals will be deemed domicile after being UK resident for 15 of 20 years.

This means, for IHT, their entire worldwide assets will be liable for the tax.

For Income Tax and Capital Gains Tax (CGT) the changes mean the remittance basis of taxation will not apply to those people who become deemed domicile.


Individuals who are becoming UK deemed domiciled for the first time in April 2017 will be able to benefit from a rebasing provision. This allows the individual to choose to rebase any or all of their assets for the purposes of CGT computations at April 2017.

Those individuals who will not become deemed domiciled in April 2017 should consider whether it is beneficial for them to undertake their own “personal rebasing” by disposing of and then re-acquiring their assets.

Mixed funds

As the changes relating to deemed domicile are likely to significantly affect long-term residents, the government has proposed that non-domiciled individuals will be able to “clean” any mixed funds they may have outside of the UK.

This option will be open for a one-year period from April 2017. The cleansing process will only be available for cash assets, so non-domiciles holding mixed funds in investments will need to convert them into cash if they wish to benefit from the clean-up.

UK residential property

The biggest change is in respect of holding structures for UK residential property. Currently any assets held in an offshore company are excluded for IHT.

From April 2017, any UK residential property held in an offshore structure (company, trust, partnership etc) will be liable to UK IHT (subject to certain exceptions).

This will have a significant impact for offshore trusts as many of these will now come into the relevant property regime. This means that IHT will be payable at every 10 year anniversary of the settlement and on any capital distributions from it.

Many of the finer details of the proposals are still to be finalised, including how debt will be treated under the new rules. This should become clearer following the publication in December of the draft Finance Bill 2017.

Further information

For further information please contact either Roger Holman or Amanda Chapman (or your usual Brecher contact).

This publication gives general guidance only. It may not always apply and should not be relied on in place of specific legal advice. We use the word “partner” to refer to a member of the LLP,
or an employee or consultant who is a lawyer with equivalent standing and qualifications.