Countdown to 2017: Non-dom tax changes


Andrew Goldstone

Although a year away, the UK government is planning major changes to the way non-domiciled individuals are taxed. This represents the most fundamental tax change non-doms have ever faced. Non-doms are part of the fabric of London and have added to the diversity of our great city.  They boost the economy and spend significant sums of money, not only on property but on art, interior designers, restaurants and fashion. Don’t lets forget they also send their children to school and university in the UK. Let’s have a campaign to keep them.

Luxury Topping asked Andrew Goldstone, Partner at Mishcon de Reya, to brief readers on the new rules and what they will mean for non-doms living in the UK.

The changes

Under the new rules, a non-domiciled individual who has been UK resident for 15 of the last 20 tax years will automatically be deemed domiciled for all tax purposes including inheritance tax. Non-doms will no longer be able to access the remittance basis once they have been UK resident for 15 of the previous 20 tax years. They will pay tax on their worldwide income and capital gains on an arising basis regardless of whether the income or gains are remitted to the UK. Non-doms will also then be subject to inheritance tax on their worldwide assets.


Trusts that were set up before a non-dom becomes deemed domiciled will still offer future protection. Although we still have no detail, the government has indicated that any trust income and gains retained in the trust will not be taxed even if the person who created the trust, or the beneficiaries, are deemed domiciled under the new rules. Such trusts will generally also offer the same inheritance tax treatment as at present, namely that any non-UK assets in the trust will be permanently excluded from inheritance tax.

UK residential property

All non-domiciled individuals who own UK residential property through an offshore company (whether the shares are owned personally or through a trust or foundation) will be subject to inheritance tax as if the offshore company is transparent or does not exist. The ability to shelter UK residential property by holding it within an offshore company will be removed from 6 April 2017.

Changes for non-doms who had a UK domicile of origin

An individual born in the UK with a UK domicile of origin may have left the UK many years ago on a permanent basis and acquired a domicile of choice elsewhere. If that individual ever becomes UK tax resident again, even on a short term basis, they will immediately be treated as UK domiciled for income tax and capital gains tax purposes. For inheritance tax purposes they will have a grace period of just one year. They will not be entitled to non-domiciled tax treatment and they won’t have the 15 year grace period available to other non-doms who move to the UK. Even trusts set up before they returned to the UK won’t receive favourable treatment unlike those set up by other non-doms before they become deemed domiciled. These rules will also apply to those who returned prior to April 2017. This is particularly harsh on those who returned before the proposals were even announced and who will now be facing a very different tax regime.

Updates from the Budget

Two new announcements came out in the Budget. The base cost of non UK assets will be taken to be the market value as at 6 April 2017 for those becoming deemed domiciled in April 2017; and there will be transitional provisions for those with offshore funds that are remitted to the UK. There was really nothing else to report and many clients were left disappointed at the lack of any meaningful update.

With little over 12 months before the new rules come in, we will be closely tracking the new legislation, accompanying government guidance and related announcements and will publish further information on our website over the coming months.

Mishcon de Reya have created three new animated films which are quite fabulous to watch. Featuring Robin Rowland, CEO of YO! Sushi, Itay Talgam, Conductor and Author, and Peter Usborne, Founder and Managing Director of Usborne Publishing, the purpose of these films is to bring the programme to life and to celebrate the unique story behind every business shaper.