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UK Consults On Non-Dom Tax Reforms

Wednesday, October 7, 2015

The UK Government has released details of its plans to abolish the permanency of non-domicile status through the introduction of a "deemed domicile rule."

In his Summer Budget, Chancellor George Osborne announced plans to abolish the permanent non-dom tax status, meaning that anyone resident in the UK for more than 15 of the past 20 years will have to pay full UK tax on all worldwide income and gains. According to a consultation document published by the Government, the new rules will also ensure that "individuals who are born in the UK and are UK domiciled at birth will not be able to claim that they are not domiciled for tax purposes while they are living in the UK."

Under the plans, from the 16th year of UK residence, a foreign domiciliary will become "deemed-UK domiciled." They will no longer be able to use the remittance basis of tax, nor will they be able to rely on any other rules for people who are not domiciled in the UK. Their foreign and UK assets will be subject to inheritance tax.

The proposed rules will mean that an individual who has lived in the UK for 15 consecutive tax years and then leaves the UK for six or more consecutive tax years could return to the country and claim non-dom status for a further 15 years, assuming they still had a foreign domicile status under general law. The Government said that this will allow those non-doms who are internationally mobile to continue to benefit from non-dom status in a way that is not appropriate for those who are firmly based in the UK.

The Government may choose to preserve the GBP2,000 (USD3,032) de-minimis threshold for those non-domiciled individuals who become deemed-UK domiciled. The Government intends that earnings that relate to a period while an individual was not domiciled and not deemed-UK domiciled that are paid after the individual becomes deemed-UK domiciled will still be eligible to be taxed under the remittance basis where all of the applicable conditions are met.

It does not intend that non-domicilliaries who become deemed-UK domiciled should have to pay UK tax on income and gains in offshore structures that were set up before they became deemed domiciled. The Government will ensure that any individual who becomes deemed-UK domiciled will continue to be protected from UK tax on offshore trusts that they have settled while neither they nor their spouse or children receive any benefit from the trust.

In his foreword to the consultation, David Gauke, Financial Secretary to the Treasury, said: "The majority of non-domiciled individuals who come to the UK leave again within a few years from the date they first arrive and so will not be affected by these reforms. These announcements have been carefully targeted to address some unfairness in the current rules in a way that will not deter those individuals who might be considering a move to the UK. The reforms will return the system to its intention of supporting those from overseas who come to the UK but who don't intend to stay here permanently."

The consultation closes on November 11.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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