A further consultation on the taxation of non domiciliaries was published in August 2016. As well as giving feedback on the September 2015 consultation, further points were raised.
The main thrust of the proposed changes is for all UK residential property to be subject to inheritance tax (IHT) regardless of how it is owned and for all non domiciliaries to be deemed domiciled after 15 out of 20 years in the UK for all taxes. Currently residential property owned by an offshore trust or company escapes the IHT net and deemed domicile only applies to IHT, and after 17 years out of the last 20 in the UK.
As part of the consultation we have attended several meetings with HMRC and HM Treasury to obtain greater clarification of the proposals, which in some respects were incomplete in the consultation. We also proposed an alternative approach regarding existing trusts, where settlors becoming deemed domiciled for income tax and capital gains tax will result in tax charges from long standing trusts.
The key points made in our response are:
In addition to the consultation on the proposed tax changes, suggestions were invited for improving business investment relief. Our comments included
If the government is making domilcile a question of when and how long people live in the UK, then leaving the UK should allow people domiciled in the UK whether by birth or by residence under the new rules, to surrender that domicile on leaving if they show no intention of returning.