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You are here: Home » Business services in Calderdale » Tax Planning » Important tax changes for non-doms

Important tax changes for non-doms


Significant changes affecting the UK tax status of non-domiciled individuals (non-doms) take effect on 6 April 2017 – and have far-reaching consequences for the majority of those who have previously enjoyed the tax breaks associated with non-dom status, regardless of whether they were initially born overseas or in the UK.

The remittance basis and the new 15/20-year rule

Under the new changes, non-domiciled individuals who have been a resident in the UK for 15 of the past 20 financial years will now be considered domiciled in the UK for all associated tax purposes, regardless of when they arrived.

This legislative change, known as ‘the 15/20-year rule’ effectively means that such individuals will no longer be entitled to claim the remittance basis for Income Tax or Capital Gains Tax (CGT) purposes. This means that those affected will be subject to UK tax on their worldwide income and gains.

Furthermore, for those who previously had a domicile of origin in the UK and later moved abroad, thus acquiring a domicile elsewhere, their UK domiciled status will be immediately reinstated if they return to the UK.

Non-doms’ residential property subject to UK Inheritance Tax

As of 6 April 2017, non-doms who hold UK residential property indirectly through an overseas intermediary, such as an offshore trust, will see such properties subject to UK Inheritance Tax (IHT).

Previously, residential property held in such structures would be overlooked as ‘excluded’, but under the new rules, such property – however held – will be within the scope of IHT. This means that UK IHT will be payable upon any significant IHT event, including a death, gift or ten year anniversary of a trust.

Grace period for ‘mixed funds’

Non-doms with offshore funds made up of untaxed foreign income and gains will be granted a grace period of two years from April 2017’ to rearrange these mixed funds, sell any assets and separate any funds into their constituent parts of foreign income, foreign gains and clean capital. The latter can then be remitted from their segregated clean capital account in line with previous rules.

This gives an opportunity for people to reorganise their affairs to benefit more from the remittance basis where this is still available, or where it has been used previously, as those old unremitted monies remain liable to UK tax under the remittance basis, even if they are now subject to tax on an arising basis.

Under these rules, excluded property trusts can be used as an important planning tool as they will remain an effective way of sheltering assets from UK Inheritance Tax before an individual becomes domicile.

This will also apply to those who are newly ‘deemed domiciled’ under the 15/20-year rule.

If you are concerned that these important changes to the taxation of non-doms are likely to affect you, please contact us. If you are able to get in touch sooner rather than later, our experts can determine the wider implications of these tax changes, how you will be personally affected and how we might be able to help you to mitigate any potentially heavy tax charges.

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Latest News

Make sure to include SEISS grants on your next tax returns

June 10th, 2021

People who enrolled in the Self-Employment Income Support Scheme (SEISS) have been reminded that they must include income from their grants on tax returns to HM Revenue & Customs (HMRC), as it is subject to Income Tax and National Insurance.

They should liaise with their accountants so an accurate return can be sent to HMRC, covering the various periods of the scheme to avoid any penalties.

This scheme was set up by the Government to provide support during the Coronavirus pandemic for those who are self-employed, either as a sole trader or a partner in a partnership.

It was originally announced on 26 March 2020 and provided an initial grant for self-employed individuals whose businesses were adversely affected on or before 13 July 2020.

A second grant was then made available for individuals who were ‘adversely affected’ on or after 14 July 2020.

Subsequently, on 1 July 2020, the scheme was extended to provide payments to certain self-employed individuals (or partners in partnerships) who did not originally qualify.

On 24 September 2020, a further extension to the SEISS scheme was announced under which a third and fourth grant would be provided.

The third grant notionally covered the three months from 1 November 2020 to 29 January 2021.

On 3 March 2021, it was announced that the fourth grant would take account of 2019/20 trading profits on tax returns submitted by midnight at the end of 2 March 2021.

A fifth grant was also announced when Chancellor Rishi Sunak presented his 2021 Budget on 3 March, he announced a further extension which will now run until the end of September this year. It was welcome news for many self-employed people throughout the UK.

The fifth and final SEISS grant will cover lost earnings from May onwards, and self-employed individuals and partners can claim it from late July 2021 (the exact date is to be confirmed).

It covers 80 per cent of average self-employed profits if your turnover has fallen by more than 30 per cent; those who haven’t been as badly affected can still get a 30 per cent SEISS grant.

You don’t need to repay a SEISS grant – it is not a loan. However, SEISS grant awards are subject to Income Tax and Class 4 National Insurance contributions and your accountant can advise on this.

The SEISS grants are taxable in the tax year in which they are received. So, the first three SEISS grants are taxable in the 2020/21 tax year and they should be reported in full in your 2020/21 Self-Assessment tax return.

If you’re self-employed and your sole trader business receives a SEISS grant in the fourth or fifth rounds, they’re taxable in the 2021/22 tax year and should be reported on your 2021/22 Self-Assessment return.

To make it easier for self-employed people to enter money received from SEISS grants, HMRC will include a box on the 2020/21 and 2021/22 Self-Assessment tax return forms.

Link: Check if you can claim a grant through the Self-Employment Income Support Scheme

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