Our Articles

  • March Budget 2017



    At Summer Budget 2015 Chancellor Osborne announced fundamental changes to the tax regime for non-domiciled individuals. They involve deeming an individual to be UK domiciled for all tax purposes even though he may be non-domiciled in the UK under general law. The rules will apply for income tax, capital gains tax (CGT) and inheritance tax (IHT).

    From 6th April 2017 it is expected that an individual will be deemed UK domiciled for income tax, IHT  and CGT:

    -if he has been UK resident for at least 15 out of the last 20 tax years, or

    -if he was born in the UK with a UK domicile of origin, subsequently left the UK and acquired a non-UK domicile of choice and later becomes resident in the UK

    The 20-year ‘look-back’ period for 2017/18 is 1997/98 to 2016/17. The ‘clock’ does not restart from 2017/18.

    Following the responses to the initial consultation, it was announced that non-domiciliaries:

    -caught by the deemed domicile 15-year rule in 2017/18 will be able to rebase their foreign chargeable assets for CGT purposes as at 5 April 2017 subject to certain qualifying criteria being met.

    -will have a one-off opportunity to clean-up existing mixed funds within foreign bank accounts  subject to certain qualifying criteria being met (transfers out have to be made between 6 April 2017 and 5 April 2019)

    -will be able to take advantage of a special regime for non resident trusts which have been set up by a non domiciled settlor.  These will be referred to as “Protected Settlements” under the new regime.  Subject to certain strict conditions being met these settlements will continue to provide ongoing shelter from IHT, CGT & Income tax even after the individual becomes deemed domiciled in the UK under the new rules as long as no further assets are added to the trust structure after 5 April 2017.

    Benefits received from the settlement either in the UK or overseas will for remittance basis users (RBU’s), be taxed by matching to overseas income and gains in the structure.  Thus all Non Dom RBU’s will be taxed on overseas trust structure income and gains on a worldwide benefits received basis (regardless of whether or not monies are remitted to the UK) rather than the arising basis that would apply in the absence of a protected settlement.  Note that UK source income will however remain taxable on the arising basis. 

    Whilst these measures are good news for the non-domiciliaries, they have underlying traps for the unwary that were not obvious at the time of the original announcements. Great care will be needed if you wish to take advantage of these transitional provisions and specialist advice will be required.

    Clean-up of mixed funds

    One of the changes announced in the Budget affects the cleansing of mixed funds. Based on the latest draft legislation, released on 26 January 2017, it was pointed out by the Chartered Institute of Taxation that mixed funds containing pre-6 April 2008 income and / or capital were excluded from the clean-up. 

    It was confirmed in the Budget that the Finance Bill 2017 clauses will be amended to include such mixed funds within the opportunity. This probably reflects the original policy intention, since excluding such mixed funds would severely limit its usefulness. 

    However several uncertainties remain, including whether it will be possible to clean-up mixed funds based on reasonable estimates of foreign income, capital gains and capital rather than absolute certainty.  Whilst it is possible that this may be ironed out in the Finance Bill 2017 clauses due for publication on 20 March 2017, it is likely that others will be covered in the subsequent HMRC guidance.  It will therefore be necessary to wait for the HMRC guidance before beginning to split out mixed funds. The fact that the time limit has been extended to 5 April 2019 (from the originally proposed deadline of 5 April 2018) is helpful here.

    UK Residential property

    The attack on UK residential property continues and with effect from 5 April 2017 all UK residential property will be subject to IHT regardless of the offshore structure employed to hold the property.  This may come as a surprise where an offshore trust holds offshore shares in a company which owns UK residential property.  In the past this would have been excluded property for IHT purposes but going forwards the UK residential property will taint the shares of the offshore company. 


    We will of course continue to monitor developments in this area but in the meantime if you are a UK resident non domiciled individual and / or you own UK residential property (wherever you are resident) then if you have not already taken advice time is fast running out.  The new regime will apply from 5 April 2017 and in many cases planning opportunities will be severely restricted after this date.  The information contained in this letter is a not a substitute for formal tax advice and you should not take any action or refrain from taking any action without first seeking specialist advice. 

    Yours sincerely

    Hamels Consultants LLP

  • Spring Budget 2015


    The 2015 Spring Budget has recently been delivered and a number of new measures have been introduced.  This has been a largely political budget with a number of headline grabbing announcements including the diverted profits tax, private equity management fee planning and the proposal that annual tax returns be replaced with online digital accounts.

    There are further changes involving the Annual Tax on Enveloped Dwellings (ATED) and the rates have been increased by 50% above inflation.  The scope of this legislation has been extended to catch properties valued at  £1m upwards from 6 April 2015 and £0.5m upwards from 6 April 2016.  The ATED related gains legislation has been amended accordingly to ensure that it applies to the lower values.  

    Changes to the taxation of UK resident non domiciled individuals are broadly in line with expectations.  From 6 April 2015 a new annual charge of £90,000 will be introduced for individuals who have been resident in the UK for at least 17 of the last 20 years and the charge paid by individuals who have been resident in the UK for at least 12 of the last 14 years will increase from £50,000 to £60,000.  The government are also consulting on whether or not a minimum 3 year period should be applied to any claim to either opt in or out of the remittance basis of taxation.

     As anticipated Capital Gains Tax will now apply to all disposals of UK residential property by Non Resident individuals, trusts, personal representatives and narrowly controlled foreign companies from 6 April 2015.  Relief is available where ATED related gains have been brought into charge and also for periods of ownership prior to 5 April 2015.  Private Residence Relief may also be available in appropriate circumstances.

    Changes to one of the main reliefs from Capital Gains Tax in respect of UK residential property Private Residence Relief (PRR) have been introduced to restrict relief where the taxpayer is not resident in the jurisdiction where the property is located.  In these circumstances PRR is only available where a taxpayer and spouse or civil partner have between them spent at least 90 days in the property over the year.

    Various changes have been introduced to restrict the availability of Entrepreneurs Relief where contrived structures are involved and other changes have also been introduced affecting disposals to related close companies.