The UK government initially announced in the 2015 Budget that it will pare back the tax perks offered to people whose permanent home or domicile is outside the UK, drawing up new limits on their ability to keep offshore income out of Britain’s tax net.
Non-dom reforms
Under the new non-doms system, set to go live on 6 April, non-UK domiciles who have resided in the country for more than 15 of the past 20 tax years will now automatically be deemed UK-domiciled.
Non-dom status for Britons who return to the UK but claim to have a permanent home abroad will also be removed.
The move is expected to net the UK Treasury an extra £995m ($1.2bn, €1.1bn), with an extra £245m coming from the removal of inheritance tax (IHT) loopholes on UK residential properties held by non doms through offshore companies.
Returning to UK?
Martin Rimmer, head of tax for south-east Asia at The Fry Group in Singapore, home to around 50,000 British expats who predominantly work in finance and legal services, said the changes are deterring some wealthy Brits from returning to the UK.
“What we are seeing is clients wanting to discuss different ways of being tax efficient in the UK such as UK tax advantaged investment schemes, (offshore portfolio bonds, enterprise initiative scheme, ISAs, pensions), and thinking differently about the succession of wealth down the generations.
“In the case of some, we are seeing them simply decide not to become resident in the UK and changing their long-term plans.
“Others are more sanguine and accept that if they want to enjoy the benefits of being in the UK, it will come with the tax consequences the law imposes,” he told International Adviser.
Deemed domicile
Expats affected by the change were usually born in the UK, went overseas and put down roots and probably became non-UK domiciled to keep their wealth outside the scope of the UK tax net even if they subsequently returned to the UK.
Now tens of thousands of British expats returning to the UK, will be taxed on income and gains from any offshore trusts or companies they owned.
In 2014/15, around 83,200 individuals had a foreign domicile, meaning they did not view the UK as their long-term home, according to figures from HM Revenue & Customs (HMRC).
Meanwhile, there are 53,300 users of the remittance basis, a tax break for non-doms which means they are taxed only on foreign income and capital gains when they are remitted to the UK.
They will also fall into the UK inheritance tax net, subject to a 12-month grace period.
