New UK Chancellor Philip Hammond gave his first Autumn Statement on 23 November 2016. Whilst there were no further details relating to the reforms of the taxation of non-UK domiciliaries and UK residential property, the government has confirmed that these changes are to go ahead and will be effective from 6 April 2017.
On 23 November 2016, UK Chancellor Philip Hammond gave his first Autumn Statement. The key points to note are as follows:
The changes to non-UK domiciliaries (Non Doms) and UK residential property will be going ahead and draft legislation will be published on 5 December 2016. This leaves a very short window of time for affected UK resident individuals (Non Doms who will have been resident for more than 15 out of the last 20 tax years or who were born in the United Kingdom with a UK domicile of origin) to take any mitigating steps. Non Doms who own UK residential property through a structure should seek advice and allow sufficient time for restructuring prior to April 2017. Unfortunately, no relief from capital gains tax or stamp duty land tax for Non Doms “de-enveloping” their property structures has been forthcoming.
The government has also reiterated that offshore trusts established before individuals become deemed domiciled under the new rules will not be taxed on non-UK income and gains that are retained in the trust. Whilst this is good news for settlors who do not need distributions from existing structures, most individuals who have established offshore trusts should urgently review existing structures once the draft legislation has been published.
The government will be consulting on a new legal requirement to register offshore structures. This is in line with several moves towards greater transparency of beneficial ownership, such as the automatic exchange of information between tax authorities that will take place under the Common Reporting Standard (CRS) and the ongoing consultation on the public register of beneficial ownership of UK residential property.
The government has emphasised its commitment to strengthening tax avoidance sanctions and tackling tax evasion. A new legal “requirement to correct” a past failure to pay UK tax on offshore interests is intended to draw focus to the limited time for individuals to bring their UK tax filing up to date before information is received by HMRC from relevant jurisdictions under CRS. It is clear that non-compliant individuals will face much harsher sanctions if they do not come forward voluntarily within a specific timeframe.
Click here for more detailed information about the government’s previous consultation documents.
Individuals who may be affected by the proposed reforms should seek advice as soon as possible to ensure they have time to plan before the changes take effect in April 2017.