If so, the basis on which you are taxed in the UK has significantly changed, but there is a window of opportunity to arrange your affairs more efficiently….
From 6 April 2017, any non-domiciled individuals (generally those who consider they are not from the UK) who have been a tax resident in the UK for at least 15 out of the last 20 tax years will become “deemed domiciled” in the UK for tax purposes.
The old Rules
Prior to these changes, all UK residents not domiciled in the UK (no matter how long they have lived in the UK), could chose to claim the remittance basis of taxation. This enables foreign income and gains to only be taxed in the UK to the extent that they are used or enjoyed in (i.e. “remitted” to) the UK. A payment (the Remittance Basis Charge – “RBC”) is required to use this basis once an individual is tax resident in the UK for at least 7 out of the last 9 tax years.
If the source of these remittances are clearly identifiable as income, gains or tax-free “clean” capital, then they will be taxed in the UK at the applicable rate for that source. However, if the funds are from a “mixed” source where that identification is not possible, there are strict ordering rules which will generally tax remittances into the UK as income first.
The new Rules
From 6 April 2017, all “deemed domiciled” individuals will no longer be able to access the remittance basis of taxation and instead will be taxed on their worldwide income and gains on an arising basis.
However, if foreign income and gains which arose prior to 6 April 2017 (such as foreign savings) are brought into the UK after this date, they will still be treated as a taxable remittance.
Transitional Rules
In order to ease the transition between the old and new rules, certain non-domiciled individuals have a small period in which to arrange their affairs in a more tax efficient manner.
Cleansing accounts
Between 6 April 2017 and 5 April 2019, qualifying individuals have the opportunity to “cleanse” their offshore accounts by carefully separating them into clearly identifiable income accounts, capital gain accounts and tax-free (“clean”) capital accounts. This will enable foreign monies to be brought into the UK in the future in a more tax efficient manner.
Qualifying individuals
An individual does not need to have become “deemed domiciled” but:
– Must have claimed the remittance basis in at least one tax year prior to the 2017/18 tax year; and
– Was not born in the UK with a UK domicile of origin
Rebasing
Certain qualifying individuals selling foreign assets after 6 April 2017 (provided those assets were not brought into the UK between 16 March 2016 and 5 April 2017) will be able to rebase those assets to their value at 6 April 2017. As such, capital gains tax will only be payable on the proportion of the gain arising on disposal of the asset after this date.
Qualifying individuals
– Only those individuals who became “deemed domiciled” in the UK on 6 April 2017; and
– Claimed the Remittance Basis in any prior tax years; and
– Paid the RBC in any prior tax year; and
– Was not born in the UK with a UK domicile of origin
If you believe these changes might be applicable to you and are interested in finding out how we can help, please contact Jackie Hockney for further information.