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News & Insights

UK Budget Briefing

A summary of the numerous positives and new opportunities for our clients.


Chancellor George Osborne has delivered on his pre-election promise to review the tax regime for non-domiciled UK residents with effect from 6 April 2017 and indeed some seismic changes have been introduced. However it is particularly noteworthy that:

  • There was no proposed increase to the amounts of the Remittance Basis Charge (and indeed the top 90000 charge has become obsolete).
  • There was no proposal for the introduction of a statutory test for domicile.
  • The previously-mooted suggestion that non-doms would have to elect to pay the Remittance Basis Charge for a minimum election period of three years at a time has been rejected in the Budget documentation.
  • There are no plans to abolish the long-standing inheritance of non-domiciled status from parents. The deemed domicile of an individual has no effect on the domicile status of their children whose domicile status continues to be considered independently.
  • There are now effectively two clear categories of non-domiciled individual firstly those with a foreign domicile of origin (FDO Non-Doms) and secondly those whose domicile of origin was in the UK (UKDO Non-Doms).

As a result it appears that we are entering a period of greater certainty for all non-doms. What is also encouraging is that the Government is going out to consultation between now and April 2017 on the implementation of the new changes.

For those who are not already familiar with the changes all UK-resident non-domiciliaries will be subject to all UK taxes (exactly as if they were UK-domiciled) after completing more than 15 years out of the last 20 years as UK residents. We refer to this as the 15-year rule.

Another significant positive is that not only will offshore excluded property trusts settled by FDO Non-Doms before they become deemed domiciled under the 15-year rule retain their permanent excluded property status for Inheritance Tax purposes but the income and capital gains arising within such trusts even after the FDO Non-Dom meets the 15-year rule will no longer be taxable to the settlor on an arising basis. This appears to be a significant relaxation of the existing anti-avoidance provisions relating to offshore trusts. However such individuals will be taxed on any benefits capital or income they receive from the trust without being able to any longer rely on the remittance basis. Capital gains which are retained within the trust for six or more years will be subject to the 44.8% effective tax rate (once supplementary charges are taken into account) which again may not be able to be addressed via offshore distributions.

If an FDO Non-Dom who has become deemed domiciled under the 15-year rule leaves the UK and spends more than five tax years abroad he would then lose his deemed domiciled status. If he then returns to the UK with the intention of eventually leaving the UK and has therefore retained his foreign domicile status under general law he would then be able to spend a further 15 years as a UK resident for tax purposes before becoming deemed domiciled again.

It is clear that offshore trusts will still continue to be attractive in many circumstances for UK-resident FDO Non-Doms although all existing offshore trust structures need to be reviewed in advance of April 2017. This time window of nearly two years provides FDO Non-Doms with a very reasonable time window in which to restructure their affairs but it should be stressed that long-term UK-resident FDO Non-Doms should bear in mind that depending on when they first became UK resident the 15-year threshold could in fact be met in just over 13 years because of the way in which the tax residency rules apply based on tax years.



The Chancellor has severely restricted the ability of individuals who were originally domiciled in the UK from birth (UKDO Non-Doms) but who have since acquired a foreign domicile abroad to return to the UK even for a brief period of residency. Under the new rules such individuals will revert to having a UK domicile for tax purposes whenever they are resident in the UK even if under general law they have retained their foreign domicile.

The qualifying period to shed UK deemed domicile status when a person with a domicile of origin emigrates from the UK will now be increased from three years to five years.

If such individuals have established offshore trusts when they were abroad and whilst they were foreign-domiciled for UK tax purposes such trusts are regarded as excluded property trusts for UK Inheritance Tax purposes. Whilst the returning individual is UK resident and thus automatically now UK domiciled he will no longer be able to benefit from the favourable UK tax treatment of such a trust. This means that Inheritance Tax will be payable upon the settlor's death if he is a beneficiary. However upon leaving the UK again i.e. after a period of working in the UK the favourable tax treatment of such a trust will return albeit not until a period of years has elapsed with the required period depending on the exact timing and duration of his UK residency.

UKDO Non-Doms must therefore take great care to ensure that they do not inadvertently become UK resident.

Planning Opportunities

The key planning opportunities for all long-term non-doms in light of these changes are:

  • Ensure that an offshore excluded property trust is established at the most appropriate time.
  • Take particular note of the timing aspect in relation to the 15-year deadline it could in fact be as little as just over 13 years after the date of arrival in the UK.
  • Carefully consider the pros and cons of retaining assets within excluded property trusts and stripping out income and gains before April 2017 whilst the remittance basis regime is still available.
  • Consider the use of alternative tax deferral structures such as offshore insurance bond wrappers to hold personal investment wealth once the remittance basis regime is no longer available.
  • Consider leaving the UK altogether and establishing permanent residency elsewhere.
  • Consider the possibility of the family splitting their tax residency status i.e. one spouse and children living in the UK and the other spouse living and working abroad.
  • Consider the possible establishment of tax residency in a jurisdiction which has a suitable double tax treaty with the UK. The Budget papers suggest that the consultation process will include consideration of the impact of the new proposals on the application of these treaties but it is not clear whether the treaty benefits will be removed.
  • Look at distributing wealth from existing trusts amongst other family members prior to April 2017.



The Chancellor has clearly decided that the combination of the ATED regime and the higher rates of SDLT have not been enough to deter foreign-domiciled and/or foreign-resident individuals from enveloping their UK residential properties in offshore companies.

Many foreign owners of UK residential property had decided to retain their existing offshore property structures and suffer the new ATED charges as an acceptable price to pay for Inheritance Tax protection and/or confidentiality. The Inheritance Tax protection is being removed under the new rules although for those individuals who are UK-resident the tax consequences of de-enveloping can be extremely complicated and result in a large one-off exit charge.

Foreign owners will need to consider their options in order to mitigate their potential Inheritance Tax exposure. Obviously they could simply sell their property and rent a UK property but for many that will not be a preference. Taking out debt which qualifies as a deductible debt for Inheritance Tax purposes is not as straightforward as it used to be. Owning the property in their own name and taking out life insurance to cover the potential Inheritance Tax exposure may make sense for many. Sourcing such cover is not as difficult as many believe and we can assist in conjunction with leading financial advisors specialising in that area.

Confidentiality remains the main driver for many wealthy foreign owners of UK residential property and so the use of offshore nominee companies to purely hold the bare legal title to UK residential property as registered owner but where the beneficial interest is held personally by the individual (i.e. no tax benefits) are becoming increasingly popular and this trend is very likely to continue.

It is worth stressing that none of these changes affect the extremely beneficial use of offshore companies to own UK commercial property.

Planning Opportunities

  • Review existing offshore company-owned structures to assess the exit costs along with the cost of implementing alternative Inheritance Tax protection via the use of qualifying debt and/or life insurance arrangements.
  • For those requiring privacy of ownership at the Land Registry explore the use of offshore nominee companies to hold the bare legal title.



The Chancellor also announced dramatic changes for fund managers who receive carried interest many of whom are also non-UK domiciled although the new changes affect all managers. With immediate effect recipients of carried interest will be subject to CGT on the full amount of the carried interest receipts with the ending of the base-cost shift system which substantially reduced the taxable amount of the gain. There is also to be consultation on the treatment of carried interest in certain types of fund including hedge funds aimed at increasing exposure to income tax.

The impact of the changes on funds and their UK-resident principals will be enormous regardless of the tax domicile status of the individuals concerned. Many will consider whether they wish to remain resident in the UK. Such funds often only employ modest numbers of employees and so a transfer of the management function offshore is often feasible.

In recent years many fund managers have already relocated from the UK to jurisdictions such as Switzerland Malta Guernsey and Jersey all of whom are able to provide the necessary substance to enable fund managers to relocate there. This trend is likely to accelerate and the jurisdictions concerned will welcome them.

Planning Opportunities

Review existing carried interest arrangements in light of the new proposals and explore ways of mitigating the additional tax exposure.

Explore the viability and attraction of relocating fund management businesses abroad either to one or more appropriate offshore locations.




David Piesing


Tel: +44 1481 737601



John Medina


Tel: +44 1534 835870


Stuart McInnes


Tel: +44 1534 835857



Caroline Bennett-Akkaya


Tel: +41 22 715 1452



Matt Nell


Tel: +356 2546 8225



James Barber-Lomax


Tel: +971 (0) 55 786 2902

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