Deemed Domiciled Individuals

The Finance Act 2017 brought in some new legislation for Non UK domiciled individuals. The legislation was postponed but received Royal Assent in November 2017 and was effective from 6 April 2017. It contains legislation that will make any individual who has been UK resident for at least 15 of the previous 20 tax years, deemed domiciled in the UK for the purposes of Income Tax, Capital Gains Tax and Inheritance Tax.

From the date an individual becomes deemed UK domiciled, they will be taxed on their worldwide income and gains and be subject to Inheritance tax on their worldwide assets.

The new legislation also brings those who are deemed UK domiciled on 6 April 2017, the opportunity for them to ‘rebase’ their non UK assets at the market value at 6 April 2017. If eligible, this will mean that, when non UK assets are sold, the individual may substitute the original cost of them, for the market value on 6 April 2017.

The rebasing legislation is available to anyone who is deemed domiciled on 6 April 2017 AND has claimed the remittance basis AND paid the remittance basis charge, in respect of any year prior to 6 April 2017. Depending on an individual’s length of residence in the UK, any claim for the remittance basis in 2016/17 would render them liable to a remittance basis charge of £30,000, £60,000 or £90,000. It would however also give them the ability to rebase their non UK assets. If individuals that will have become deemed UK domiciled under the new provisions, have any non UK assets, which would make a capital gain on sale, they may decide that it is beneficial for them to make a remittance basis claim for 2016/17 or, to the extent that you are within the legislative time limits, an earlier year.

There is also the opportunity for non domiciled individuals to cleanse any mixed funds they may have (even if they are now deemed domiciled under the new legislation). This can be useful if someone has ‘relevant foreign income or gains’ mixed with a source of clean capital. The window to ‘cleanse’ will close on 5 April 2019.

If you think this situation applies to you and you would like to access the clean capital in order to bring it to the UK, or consider rebasing your non UK assets, please contact us.