Any information about the status of the non-dom changes are eagerly awaited, and we received some insight yesterday (29 July), by way of a policy paper, though there are still lots more questions, says Hilesh Chavda, partner at Spencer West LLP.
Inheritance tax will be based on residence as opposed to domicile from 6 April 2025. This is to be welcomed; it will make inheritance tax liability much more certain as taxpayers will not have to rely on the woolier concept of domicile.
What is concerning many is whether Exclude Property Trusts established before 6 April 2025 will retain this status. Labour had said, they would not before the election.
However, interestingly, the policy paper says “is considering how these changes can be introduced in a manner that allows for appropriate adjustment of existing trust arrangements, while ensuring that the treatment of all long-term residents of the UK is the same for IHT purposes”. What this exactly means, we do not know. We will have to wait for the details of the new provisions.
The policy paper also says it will implement that 4 year foreign income and gains regime, from 6 April 2025, as announced in March. This will make life simpler for international individuals as they can bring assets into the UK within the 4 year period with worrying about triggering a UK tax charge.
However, the 4 year period is less generous than the current system. Also, in line with Labour’s response to they will not introduce the transitional arrangement where foreign income is reduced by 50% that was initially announced.
However, they will implement a Temporary Repatriation Facility, which might help those who are claiming the remittance basis but will fall to be taxed on a worldwide basis when the new rules come in.
By Hilesh Chavda, partner at Spencer West LLP
