A recent announcement by the Treasury could put an end to a permanent non-dom status for tax purposes.
A consultation put forward by the Treasury has suggested that thousands of ‘non-dom’ property owners could face large Inheritance Tax (IHT) bills as part of its drive against property ownership by offshore companies. This follows last year’s summer budget which announced plans to change the tax regime for people who have a foreign domicile.
Currently UK born individuals are liable to pay IHT on their worldwide property, whereas non-doms are only liable on property that is situated in the UK. However, the Government wants to remove this exemption so that individuals can no longer put property into an offshore company to avoid IHT.
The consultation states that it would want to abolish the practice of “enveloping”, where individuals hold UK residential properties through an overseas company or similar vehicle. It will effectively bring all UK residential property within the scope of IHT, irrespective of how the property is owned (for example through a company).
Tom Curran, CEO of estate administration specialists Kings Court Trust, said; “These changes could affect a large number of nom-dom property owners in the UK. IHT is often seen by many as a ‘stealth’ tax, although the consultation paper also includes several proposals that are likely to be welcomed by non-doms, including the notion that investment relief could be expanded. We will be following this consultation closely over the coming months to see how it progresses.”
If this consultation is successful, the changes will be implemented in April 2017.
For more information on Kings Court Trust’s services, visit www.kctrust.co.uk.