Reform to the taxation of non-domiciled individuals

20 December 2016

20 December 2016 by MHA MacIntyre Hudson

In the March 2015 budget, it was announced that there would be a series of reforms to the taxation of non UK domiciled individuals that would be legislated in the 2017 Finance Bill and would take effect from 6th April 2017. This announcement can be seen against the context of previous Government activity in this area; most importantly the widespread changes introduced in 2008, the steady widening of the UK tax base and a reduction in the attraction of the UK tax system for non UK domiciled individuals. Following two consultation documents, on the 5th December 2015 draft legislation was published. This legislation is subject to amendment before it becomes law, but it gives a strong indication of how the tax landscape for non UK domiciliaries will look in the new tax year and the planning that should be considered prior to 6 April 2017.


The rules to be introduced from 6 April 2017 can be broken down into the following key areas:

  • Deemed domicile – deemed domicile rules have existed for Inheritance Tax (“IHT”) purposes for many years. It is proposed that this be extended to Income Tax (“IT”) and Capital Gains Tax (“CGT”) and the test for deemed domicile adjusted to make it easier for such status to arise.
  • Automatic deemed domicile for individuals born in the UK with a UK domicile of origin who obtain a foreign domicile of choice but revert to UK residence.
  • The extension of IHT to UK residential property, regardless of ownership structure.
  • Reform of the taxation of offshore trusts where benefits are received by UK resident deemed domiciled individuals.
  • Improvements to the business investment relief.

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