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From 6^th April 2017, new rules regarding non-domiciled individuals will take effect. Those resident in the UK for at least 15 of the past 20 tax years will become “deemed” UK domiciled for income, capital gains and inheritance tax purposes. Such individuals will no longer have the option to claim the remittance basis and therefore, they will be taxed on all their worldwide income and gains arising after the date they become deemed domiciled. Any income and gains realised before that date will be taxed only if they are remitted into the UK.

The rules used to calculate the years of UK residence are the ones in place for each relevant year. In order to establish if an individual is deemed domiciled, there are a few points to be taken into consideration:

• Non-consecutive years – the 15 years of residence do not have to be consecutive for an individual to become deemed domiciled.
• Non-ordinarily resident – all years of residence will be in the taken into account, irrespective of whether the individual was ordinarily or non-ordinarily resident.
• Split year treatment – the years where split year treatment was applied will also be included in the calculation.

The deemed UK domiciled status can be lost for income and capital gains tax purposes if an individual becomes non-UK resident and remains non-resident for at least 6 years. Such individuals will start a new period of up to 15 years in which they can be resident without being deemed domiciled, thus enabling them to claim the remittance basis.

The government has confirmed that the inheritance tax deemed domiciled provisions will also change in order to be aligned with current legislation. Under the old rules, non-domiciled individuals became deemed domiciled for inheritance tax purposes when they have been UK resident for at least 17 of the past 20 years. Under the new rules, the deemed domicile status will apply when an individual has been resident for at least 15 of the previous 20 tax years.

Another aspect of the reform concerns individuals born in the UK with a UK domicile of origin and who have acquired a domicile of choice in another country. From April 2017, such individuals will be treated as having a UK domicile for tax purposes whilst they are resident in the UK. Offshore trusts will therefore have no protection in terms of income, gains and inheritance tax if an individual with a UK domicile of origin becomes UK resident.

The information in this article is believed to be factually correct at the time of writing and publication, but is not intended to constitute advice.  No liability is accepted for any loss howsoever arising as a result of the contents of this article. Specific advice should be sought before entering into, or refraining from entering into any transaction.