We previously covered the changes that were due to come into effect on 6 April 2017 that affected the long term UK residents who would soon become deemed-UK domicile for tax purposes.
The idea of this was to remove the advantage held by non-UK individuals and to level the playing field in terms of UK taxation.
How do you qualify for the status of UK domicile?
As a deemed-UK domicile individual (i.e. if you had remained a UK resident for at least 15 of the last 20 tax years), rather than being able to be assessed on either the arising or remittance basis, you would effectively be deemed a UK domiciled individual.
This would mean that all of your worldwide income and gains would be liable to UK income and capital gains tax.
What does the general election mean for the proposed changes?
However, since the announcement of the general election on 8 June 2017, this has caused some confusion within the tax community.
This is because the election has meant that these proposed changes to domicile rules have been put on hold rather than being rushed through the latest Finance Bill for 2017.
This is ultimately due to government being in a state of purdah which means no new laws can be enforced until parliament returns to normal.
It wasn’t just domicile changes that was ‘dropped’ but in fact, quite a lot of the changes proposed to have been in force from 6 April 2017 have now been put on hold.
What should be done with existing tax planning exercises?
Due to the delay in the implementation of these rules, as it currently stands, non-UK domiciled individuals could still technically take advantage of their status to optimise their tax position (both in the UK and out of the UK).
The worry however is that once parliament is settled and the general election results are released, the rules that were due to be implemented in April 2017 would be retrospectively be put into action.
As such, any tax planning exercises that occurred before 5 April 2017 should not be affected in any way, but any proposed changes to ‘take advantage’ of the current unknown status is probably not recommended due to the ability of parliament to retrospectively introduce the tax changes.
Although we are in this state of purdah with certainty on rule changes not likely to be realised until mid-June, if you still would like to find out more information about how Wisteria can assist you with your personal tax affairs, then please contact one of our specialists on 020 8429 9245 or email [email protected].