05 April 2024
Dixcart Group Limited
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On 6th March 2024 the UK Chancellor of the Exchequer,
Jeremy Hunt, delivered his second Spring Budget for the current
Conservatve Government.
Contained within the Budget were proposals for a change to the
current system of taxation of non-domiciled individuals with effect
from 6th April 2025, from the existing regime where UK
resident non-domiciled individuals are only taxed on income
remitted or originating in the UK and capital gains arising in the
UK, to a regime based on residence whereby all UK residents will
pay UK tax on foreign income and gains following four years of
residency.
In addition, from 6th April 2025 the protected trust
regime will also effectively cease to apply, with the result that
income and gains in affected trust structures could become taxable
on the settlor(s) from that date.
Mention is also made of the intention to change the inheritance
tax laws so that exposure is determined by reference to residence
rather than domicile. However, these plans have yet to be detailed
and will be subject to consultation.
“Hope for the best and prepare for the
worst” T. Norton & T Sackville
Whilst the above is a departure from the Conservative’s
previous stance on the status of non-doms it is very much in line
with proposals mooted by Labour over the years.
At present, these are only proposals and the legislation
(whatever form it may take) is yet to be drafted let alone come
into effect. It remains to be seen what form any Conservative
legislation would eventually take or whether, should the matter
still be in abeyance at the time of the next General Election and
Labour come to power. It is likely they would want to put their own
stamp on the matter and one would assume that any amendments that
Labour introduce would be unlikely to dilute the Conservative
proposals.
Therefore it is recommended that existing Non-doms and those
considering re-locating to the UK to consider how they may wish to
(re-)structure their affairs prior to 6th April 2025 and
discuss their options with a qualified tax advisor. As a starting
point there are numerous articles freely available discussing the
terminology used in the Budget and the effect that the proposed
changes may (or may not) have, depending on how they are
implemented.
Options that individuals may wish to consider include (but are
not limited to):
- Use of an insurance wrapper or other insurance-based
products - Use of a Family Investment Company
- Formation of an excluded property trust now whilst delaying the
funding of the trust until clarification on the future inheritance
tax regime - Accelerating the receipt and realisation of foreign income and
gains where possible to crystalise Foreign Income Gains (FIG) as
detailed in the Budget - Requesting trust distributions prior to 5 April 2025 to
generate foreign income and gains for the same purpose (assuming
this is not blocked by the new rules) - Where possible amending the terms of existing trusts in order
to minimise the impact of the loss of the trust protections (such
as the exclusion of the settlor and certain other family members so
as to prevent the attribution of income and gains to the
settlor)
“If not now, when?” Hillel the
Elder
While it is true that “Only death and taxes are
certain” there does appear to be some leeway with the second
as to the form it may take provided action is taken in a timely
manner.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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