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Changes to the IHT rules for non-doms

Changes to the IHT rules for non-doms

Overview Draft legislation was published on 9 December to effect some of the proposed amendments to the IHT rules for non-doms. For an individual born in the UK with a UK domicile of origin who leaves the UK and acquires a domicile of choice outside of the UK there will be an additional rule to consider. Such an individual will remain 'deemed domiciled' for IHT until the later of: These amendments are mainly focussed on the 'deemed domicile' rule for IHT purposes, and the 'excluded property' status of non-UK situs assets held in trusts established by non-UK domiciled settlors. )

Three years from the date they acquired a domicile of choice outside of the UK OR the changes discussed below will be operative from 6 April 2017 but many non doms will need to focus on the proposed new rules now and adjust their position accordingly.

After they have completed six tax years of non- UK residence. In practice, this could mean that an individual who leaves the UK to acquire a non-UK domicile of choice will remain 'deemed domiciled' for IHT for a significant period of time. For example, if he or she should only acquire a non-UK domicile of choice after more than three years of non-UK residence, it could be more than six years before losing his or her deemed domicile status for IHT. This is different to the suggested test in the consultation document of 30 September and is, in our view, a disappointing backward step. It is not clear why the draft legislation differs from the consultation document. The Government has stated that representations made during the consultation are not reflected in the legislation at present and it is to be hoped that the rules will be further amended before they are enacted. A wider response to the consultation document has been delayed and we expect it to be published along with additional legislation in 2016. Changes to the 'deemed domicile' rule for IHT Currently, a non-UK domiciled individual will be 'deemed domiciled' for IHT purposes if he or she has been UK domiciled within the preceding three years, or if he or she has been UK resident for not less than 17 out of the 20 tax years ending with the relevant tax year. From 6 April 2017, an individual with a non-UK domicile of origin will be deemed domiciled if he or she has been UK resident for at least 15 of the previous 20 tax years. This will have the following impact for IHT purposes in practice: There will also be a change to the IHT 'deemed domicile' rules for individuals born in the UK with a UK domicile of origin who acquire a domicile of choice outside the UK and who later resume UK residence (Returning Doms). Returning Doms will be 'deemed UK domiciled' for any tax year in which they are UK resident provided they were also UK resident for at least one of the two preceding tax years. Whilst this requirement to be UK resident during one of the two preceding tax years may provide a short 'grace period', in practice, this may not have a significant impact and such individuals could find their worldwide estate becoming subject to UK IHT after less than six months of presence in the UK.


Trusts established by non-doms who later become 'deemed dom' for IHT years of non-UK residence (rather than four) before that election will be revoked. At present there are no transitional provisions to prevent this extended period applying in cases where an election has already been made. Where a trust is established by a non-domiciled settlor (who has a non-UK domicile of origin), any non-UK situs assets held within that trust will remain excluded property for IHT purposes even if the settlor later becomes 'deemed dom' under the '15 out of 20 year' rule (the 'long term residence' provision).

new iht rules for non doms

This section of TaxWorld examines New IHT rules for Non Domiciled individuals It includes various topic-sections:

Hopefully, these will provide some useful background on the issue, and equip you to make informed decisions and choices in this most financially sensitive of areas.

If you would like further assistance or more information on this subject please contact us through this email link

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