TAX For Individuals

Non-Domicile Tax Changes – Cleansing Mixed Funds DEADLINE

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Many individuals who are non-UK domiciled (so called ‘non-doms’) are in a position where they have mixed funds.  A mixed fund is an offshore fund of money, which contains more than one type of income, gains and capital, or similar from more than one tax year. Historically, such accounts have caused great difficulty because when a UK resident made a withdrawal and remittance into the UK from such a mixed fund, it was often necessary to pay tax on the basis that the highest tax rate applied.  A complex procedure was involved and the rules are far from clear. Changes in the taxation of non-doms has meant that HMRC have granted an opportunity for a limited period to cleanse mixed funds.  There are a number of conditions, but broadly this is available to a non-dom who has been taxed on the remittance basis in at least one year out of the last ten, and who can clearly identify the make-up of the fund.  In many cases, this will mean a very significant amount of analysis is required. It is important to note that this cleansing is for a limited time only and will only be available between 6 April 2017 – 5 April 2019.  Given the time and complexity of unpicking an account, it is advisable to take action as soon as possible. There are a number of conditions which include:
  • You must nominate the transfer
  • You must make the transfer between 6 April 2017 and 5 April 2019
  • You can only cleanse money
  • You must transfer from one overseas account to another
  • You must specify the amount for each category
  • You cannot have nominated a transfer from account A to account B before
  • You must be a qualifying individual at the time of transfer
  • You must make sure the transfer is for income, gains and capital, can be the whole or part of what is in the account and doesn’t exceed the amounts in the account immediately before the transfer
  • You must be able to identify the source of the funds
Before you begin the process, it is best to take professional advice about your options and to consider whether this is beneficial and practice given the history of your account.  We have seen a number of cases where dedicates of analysis are required and care needs to be taken before considering such a project. For more information on Wisteria’s tax services, please contact us.

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