Residence and Domicile changes

The Finance (No2) Act 2017 was enacted in November 2017, and it made significant changes to the residence and domicile position for many.  These changes are backdated to 6 April 2017 (which was a consequence of the 2017 General Election).  Until these changes, the deemed domicile rules applied only to inheritance tax, and only where an individual was resident in 17 out of the previous 20 tax years.  The rules now extend to income tax and capital gains tax (CGT).  The time requirement has changed to 15 out of the previous 20 years, which could now catch out some non-domiciliaries before they anticipated.  Along with the new rules, there are special rules for those born in the UK, who became non-UK domiciled for a period, and who are now returning to the UK.

Top Tips:

If you will become deemed domiciled on 6 April 2018 you should review your own tax position as there may be tax planning opportunities prior to 6 April 2018.

For individuals who became deemed domiciled on 6 April 2017 due to the rule change, there is also a rebasing event for non-UK situs assets of a non-UK domiciled individual who have also paid the remittance basis charge (“RBC”) in the past.  If those who have never paid the RBC it may be advantageous to do so now – the claim would need to be made via an amendment to the 2017 return, for which the deadline is 31 January 2019.

For individuals who have claimed the remittance basis and paid the remittance basis charge, there is a one-time opportunity to cleanse “mixed funds”.  This would allow, for example, clean capital to be remitted to the UK in the future in priority to unremitted income or gains.  The window for carrying out this exercise is 6 April 2017 until 5 April 2019.  Whilst the deadline for this is not until 5 April 2019, the clock is ticking - this can be a complex exercise and we recommend early advice be sought. 

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