UK resident non-doms had been anticipating significant changes to their UK tax position from 6 April 2017. A proposed new deemed domicile concept for UK income and capital gains tax, potential rebasing of assets and cleansing of mixed funds were just some of the changes expected. Also from 6 April 2017, the UK inheritance tax net was to be extended to include all UK residential properties owned through non-UK companies, regardless of the domicile of the beneficial owner.
However, the snap general election called earlier this summer resulted in the new rules for non-doms and inheritance tax on UK residential property (amongst other things) being removed from the Finance Bill before the Finance Act 2017 became law. Taxpayers that would have been affected by the new rules suddenly faced uncertainty as to what the new rules would be.
UK election result: clarity at last?
There are growing fears among taxpayers and commentators that the UK Government may not reinstate some key tax changes dropped from the Finance Bill 2017, including the non-dom reforms, after the Conservative party lost their majority in the recent general election.
The election resulted in a hung parliament with no political party gaining sufficient seats to form a majority government. The British Prime Minister, Theresa May, is currently negotiating an arrangement with the Northern Ireland Democratic Unionists Party to allow her to stay in office with a Conservative minority government. It may be some months before the political wrangling settles down and changes may be required to the proposed new tax rules in order for them to pass through parliament.
Furthermore, given that we are already well into the 2017/18 tax year, the question arising is from when any new rules will apply? From 6 April 2017 as previously stated or perhaps from 6 April 2018?
Many non-doms will have taken action in advance of the anticipated new rules coming into force on 6 April 2017. If further changes were to be made to the new rules, or if they were to be delayed a year such that they take effect from 6 April 2018, it could adversely impact on taxpayers who acted in good faith. For the time being, taxpayers can only wait for the final position to become clear at last.
Written by Kevin Loundes, Associate Director