Domicile Tax Changes

From April 2017, individuals who have been resident in the UK for more than 15 out of the past 20 tax years will be treated as domiciled in the United Kingdom for all tax purposes.  This will be known as the “15-year rule”.

This means that these individuals will have to pay UK income tax on their worldwide income, not just income which they bring into the UK (known as the “remittance basis”).  They will also be deemed domiciled in the UK for inheritance tax purposes.

Individuals who were born in the UK and had a domicile in the UK at their time of birth will revert back to having a UK domicile for tax years when they are treated as resident in the UK, even if they acquired a foreign domicile after birth.

Individuals who acquire a deemed UK domicile under the 15-year rule will lose it again once they leave the UK and have spent five years outside the UK.  This is likely to be relevant for inheritance tax purposes only.

Individuals who have a domicile of birth in the UK, acquire a foreign domicile and return to the UK will cease to be UK-domiciled when they leave the UK, so long as they satisfy the 15-year rule and have not acquired a domicile of choice in the UK.  Otherwise they will retain their deemed UK domicile for a further five years.

From April 2017 the government intends to bring all UK residential properties which are owned by foreign-domiciled persons within the charge to UK inheritance tax, even when the property is owned indirectly through an offshore company or partnership.  Currently only UK property which is owned directly by non-domiciled individuals is within the charge to inheritance tax.  From April 2017, trusts or individuals owning UK residential property through an offshore company or partnership will pay inheritance tax on this in the same way as UK-domiciled individuals.  This measure will only affect UK residential property and not other assets.

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May 26

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Dodd & Co have been extremely helpful and supportive from the first meeting we had with them.  After being left in a mess by our previous accountants they stepped in and sorted everything out, from broader business planning to the finer details, with no fuss and kept us informed along the way. They deal with all tasks quickly and efficiently, without prompting from us which has been a huge weight off our shoulders.  The support, advice and service we have received from Alison, Tony and the team at Dodds has far exceeded any expectations we had.  We wouldn't hesitate to recommend them.
-- Gemma Bell, Vincent & Bell Limited