Non-doms and Inheritance Tax

Archive 30.09.2015 Author: Robert Maas

The Chancellor’s attack on non-doms extends to IHT. As for income tax and CGT, a person will be treated as deemed domiciled once he has been UK resident for 15 out of the previous 20 years (instead of the current 17 out of 20) and a person with a UK domicile of origin who has acquired an overseas domicile of choice will be treated as deemed domiciled from the time he takes up UK residence.

If the individual has been resident here for 20 or more years, the IHT charge cannot be avoided by emigrating before 6 April 2017 as there will be no “grandfathering” and no transitional rules. This means that the individual would remain within the scope of IHT for five years after emigrating.

CBW Tax reaction:

Many non-doms have greater wealth than they are likely to need for the rest of their lives. Increasingly the wealthy, particularly those who have created their wealth rather than inherited it, are leaving substantial sums to charity on their death. Such a person might consider setting up a UK charitable trust before 6 April 2017 and gifting a substantial amount of accumulated overseas income and gains to the charity. The individual can be a trustee of the charity so can effectively retain control over the investment of the funds. Provided the gift is made overseas, settling the trust does not trigger a remittance for income tax or CGT purposes. As the gift is a gift to a UK charity, it does not trigger IHT either. A charity is exempt from income tax and CGT on investment income so the wealth can still grow tax-free, albeit that the growth will benefit charities, not the donor’s family, but the reality in many cases is that is what would have happened in any event.

Further information

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Robert Maas

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