Now that the summer is behind us, we await the promised consultations on the wide ranging and far reaching proposals for non UK domiciled individuals announced at the Summer Budget 2015.

It has always been difficult for the Government to ensure that the non-domiciled community are encouraged to continue to come to the UK, where they undoubtedly can bring investment, skills and spending power, without the general public perceiving that the tax breaks for non UK domiciles are too great. The phrase “not looked fair” was actually used in the official announcement.

So what could we be facing?

Resident non UK domiciles

• A deemed domicile rule for all UK taxes (income tax, capital gains tax, inheritance tax etc.) once an individual is UK resident for 15/20 tax years from 6 April 2017 with no “grandfathering rules” (also includes taxes on employment related securities). So full UK taxation on a worldwide basis from 6 April 2017.
• Extension of the time residency required abroad to lose UK deemed domicile from potentially 3 or 4 years to an overall 5 year period (including those who wish to emigrate permanently).
• The taxation of overseas trusts is to be fundamentally overhauled and non UK domiciles will find the tax planning and usefulness of these structures severely curtailed.

Returning UK domiciles

An individual who has a UK domicile of origin will automatically revive his UK domicile for taxation purposes on returning to the UK after 5 April 2017 regardless of their domicile under general law.

• Crucially, any overseas trusts set up whilst that individual has been non UK domiciled will be treated as though set up by a UK domiciliary and taxed accordingly when the settlor is UK resident (this includes UK IHT).

UK residential property

• Further changes have been announced from 6 April 2017 to bring all UK residential property, whether held directly or indirectly, within the net of UK IHT. This is intended to be the final piece in the jigsaw to remove any tax benefits whatsoever from holding a UK residential property within a structure.
• The IHT charge will be on the full market value of the residential property net of any borrowings to purchase it, on the usual chargeable events, such as death, certain gifts, exit and 10 year anniversary charges etc.
• Although to be based on the Annual Tax on Enveloped Dwellings definitions, there will be no de minimus limit and no reliefs, such as letting, will be available.
• The government will also look at enabling the “de-enveloping” of current structures without a tax cost.

The limited guidance issued after the Summer Budget, just on these measures, mentioned consultations more than 12 times, so it is to be hoped that HMRC will take their time and listen to the responses they receive when looking to implement the Government’s wishes.

These proposals will involve amending existing legislation across the statute books as well as new legislation. The last time such wholesale changes were implemented, was pretty quickly followed by a relaxation of some of the changes. It is to be hoped that HMRC will consider carefully the responses that the interested bodies will furnish them with.

Anyone potentially affected by these changes must take advice in good time to allow for a measured response to their own personal position.