Effective date for CGT, VAT on pre-registration assets, New deemed domicile rules

Last week we drew a lesson from an accountant who should have known the law when advising a client about CGT. HMRC has back-tracked on claims for repayment of VAT relating to assets acquired before registration. Also, just in case your American clients are thinking of staying the UK, we have a brief review of the changes to the deemed domicile rules from April 2017.

This is an extract from our topical tax tips newsletter dated 10 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

New deemed domicile rules

All the rules you know about domicile and deemed domicile for UK tax purposes will be rewritten with effect from 6 April 2017. The new law will extend the deemed domicile treatment to all UK taxes, not just IHT.

UK residents who enjoy non-dom status will be deemed to be UK domiciled, if they have lived in the UK for at least 15 of the preceding 20 tax years. Also any UK residents who were born in the UK with a UK domicile (former domiciled resident or FDR), but have chosen to adopt a foreign domicile, will have their domicile of choice ignored for tax purposes. Those FDR taxpayers are treated as UK domiciled from 6 April 2017 however long they have been UK tax-resident.

These changes mean the remittance basis will no longer be available to many people who live in the UK, so those individuals will be taxed on all their worldwide income and gains, whether or not the offshore funds are remitted to the UK. The remittance basis remains (and doesn't have to be claimed) for individuals with less than £2,000 per year of unremitted foreign income or gains.

The years to count for the 15/20 test are all years of UK residence, including split years and years when the individual was aged under 18. To shake off the deemed domicile treatment for income tax and CGT the taxpayer will have to become non-resident for six entire tax years. However, only four tax years of non-residence will be required to shift deemed domicile for IHT purposes.

You need to talk to all your non-domiciled clients about these changes as soon as possible, as transactions undertaken before 6 April 2107 could undermine transitional reliefs available from that date. Our expat taxation experts can help you understand the implications for your clients.

This is an extract from our topical tax tips newsletter dated 10 November 2016 (5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The full newsletter contained the remainder of this item plus links to related source material and the other two topical, timely and commercial tax tips. We've been publishing this newsletter weekly since 2007; it's clearly written and focused on precisely what accountants in general practice need to know about each week. You can obtain future issues by registering here>>>