Election causes delay to non-dom tax changes
Many non-doms have wisely spent the last few months gearing up for substantial changes to UK tax legislation, which were expected to come into force this month. But, the government has now announced a delay enacting some areas of the Finance Bill 2017, which includes these changes.
After the Brexit vote the rumour that these plans would be shelved was quickly quashed and despite the lack of clear detail until quite late in the day, the government reiterated that the changes would still be implemented. As a result the April deadline saw many non-doms radically re-structuring their tax position in light of the new rules.
Therefore, yesterday's announcement by the government that many of the proposed changes have been dropped from the Finance Bill 2017 may feel like a bolt from the blue.
What were the proposed changes?
Non-doms have been working on the basis that, from this April, inheritance tax will now apply to any UK residential property they own through a trust or company (previously not the case). Significant tax planning may have been undertaken in anticipation of the new rule that long-term non-dom residents of the UK will become deemed domiciled for all taxes, rather than just inheritance tax. People will also have had to adjust to the fact that this deemed domicile will hit once they have been resident in the UK for 15 out of the last 20 tax years, rather than 17 years as previously. The proposed changes didn't just affect non-doms; there were sweeping tax changes proposed to things like pension contributions and filing requirements for small businesses. Many of these have now also been shelved.
Dropped or just delayed?
No further details have yet been given as to if or when these changes may come around again for discussion. However, it would not be wise to assume that they have been permanently dropped. The government has spent considerable time (and money) working on the draft legislation and has previously been very committed to bringing the changes in. It is likely the case that, following the election on 8 June, these plans will soon return to the Chancellor's desk (whoever he or she might be). With the legislation essentially already prepared, we could see it implemented swiftly.
Any planning that non-doms have undertaken so far is therefore extremely valuable and will no doubt stand them in good stead going forwards. For non-doms who may not have got around to considering their UK residency and domicile, the UK residential property they own and how they might be affected by the new taxation regime, this is a golden opportunity to do so now.
Look upon this as a respite from the changes coming into force, rather than a total reversal. If you need further advice or have more planning to do, take advantage of this chance by contacting your accountant or legal adviser to think about how to be prepared when (not if!) the changes come in.
To read more about other areas of the Finance Bill 2017 which have been dropped, please see here.
For more information, contact Mark Spash or Sophie Cisler of the Succession and Tax team.