Domicile draft legislation

HMRC have published draft legislation setting out when an individual will be regarded as domiciled in the UK for the purposes of income tax and capital gains tax from 6 April 2017. They have also published a policy paper in relation to how this will work.

Under the current rules, UK resident non-domiciled individuals pay tax on UK source income and gains in common with other UK taxpayers. However in contrast to those who are resident and domiciled in the UK, a non-domiciled individual’s foreign income and gains are not taxable in the UK if the income and gains remain overseas and they make a claim for the ‘Remittance Basis’ of taxation.

Legislation will be introduced in Finance Bill 2016 to deem certain ‘long-term resident’ individuals, who would otherwise be non-domiciled in the UK as a matter of general law, to be domiciled in the UK for the purposes of income and capital gains tax.

The two deeming provisions are given by Conditions A and B. We are told that:

“Condition A applies to anyone born in the UK with a UK domicile of origin and whilst they are UK resident. Condition B applies to anyone who has been resident in the UK for at least 15 out of the previous 20 tax years.”

Anyone deemed to be UK domiciled by virtue of either Condition A or B will not be able to access the Remittance Basis.

These measures will have effect for more income tax and capital gains tax purposes on and after 6 April 2017.

For further information and help on how to advise your clients in relation to the above, please contact the TaxDesk on 0845 4900 509 and ask for Priya Dutta.