A raft of legislative changes were originally drafted to be included in the Finance Act 2017 which was released earlier this year. However, as the general election derailed the parliamentary schedule the governed decided to delay many of these changes. Many commentators hoped that the non-dom changes would therefore form part of the Finance Act 2018 effective from 2018/19.
It was therefore disappointing to see that the government has released draft legislation which seeks to backdate the changes governing non-UK domiciliaries. The draft legislation forms part of the new Finance Act 2017 (no.2) which is expected to be enacted after summer recess.
The rules will apply to non-UK domiciliaries who have lived in the UK for more than 15 tax years, and individuals born in the UK with a UK domicile who form a domicile of choice overseas but later become UK resident (also known as formerly domiciled residents or returning doms). Such persons will become ‘deemed domiciled’ for all tax purposes and will be subject to UK tax on their personal worldwide income and gains, and subject to UK inheritance tax on their worldwide wealth.
The proposed changes to the offshore trust regime also appear to be backdated to apply from 6 April 2017.
It is also important to note that the draft Finance Act (no:2) also backdated the proposed changes to the inheritance tax rules concerning residential property to apply from 6 April 2017. As a result of this legislation UK residential property held through offshore companies, or financed using offshore assets will be subject to UK inheritance tax from 2017/18
It is however not all doom and gloom. In some cases there is an opportunity to rebase capital assets to their 6 April 2017 value. There is also a wonderful opportunity to cleanse mixed funds to allow non-doms to access trapped clean capital.