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A whole raft of new tax rules have already taken or will take effect in the coming years that particularly affect those not resident or not domiciled in the UK. Such individuals should consider undertaking a thorough review of their affairs to ensure that tax planning opportunities are identified and an increasing number of pitfalls and tax charges avoided. 

Capital gains tax on residential property 

With effect from 6 April 2016 nonresidents are now liable to UK capital gains tax (CGT) on disposals of UK situs residential property. Previously nonresident individuals have enjoyed a complete exemption from UK CGT. 

After considerable uncertainty and consultation the new rules have been introduced on the basis that CGT will only be payable on gains deemed to accrue since 6 April 2015. The provisions will not, therefore, be retroactive. 

There are a number of means by which gains can be apportioned to periods arising before and after 6 April 2015; effectively taxpayers can elect for the method that is most favourable to them. 

Non-resident vendors should, however, be particularly aware that there is a strict filing deadline for reporting to HM Revenue and Customs their disposals of UK situs residential property. All sales do have to be notified to HM Revenue and Customs via an online form within 30 days of sale if penalties are to be avoided. 

Domicile status 

From April 2017 anybody who has been resident in the UK for more than 15 of the past 20 tax years will be deemed to be domiciled in the UK for tax purposes. 

From the same date individuals who are born in the UK to parents who are considered to be domiciled here will no longer be able to claim non-domicile status while they are resident in the UK. 

Both of these provisions will limit the capacity for tax planning for individuals who would otherwise have been able to enjoy non-domicile status and, therefore, take advantage of what is known as the remittance basis of taxation (subject to accepting remittance based charges in Residence and domicile some circumstances) which avoided UK tax on monies generated outside the UK but not brought into this country. 

The Government did, however, stop short of abolishing non-domicile status altogether. 

Inheritance tax 

A similar provision has been introduced for IHT purposes.

Furthermore, from April 2017 IHT will be payable on all UK residential property owned by non-domiciliaries regardless of their residence status for tax purposes. This includes property held indirectly through an offshore structure.

By Paul Webb, Thomas Westcott Tax Manager