Impending UK Inheritance Tax Changes


In the 2015 Summer Budget, proposals were announced to change the UK tax regime for non-domiciles. These proposals were the subject of a consultation paper Reforms to the Taxation of Non-domiciles: further consultation which was published on 19 August 2016. Although not finalised, it is anticipated that the new regime will take effect from 6 April 2017. As such, affected individuals should now review their positions as a matter of urgency.

Key changes include the following:

  • Introduction of the ‘15/20’ deemed domicile rule

This applies to any non-domicile who has, as of 6 April 2017, been UK-resident for 15 of the previous 20 tax years. As a result of the new regime, such individuals will be deemed UK-domiciled in respect of all taxes.

For the purposes of the test, split years under the statutory residence test will be treated as full years of residence. The regime will retain the £2,000 de minimis, applicable to individuals once they become deemed UK-domiciled.

The ‘15/20’ test will also apply to individuals born in the UK to non-domiciled parents to the extent that they will be deemed UK-domiciled at 16 years old if they are continuously UK-resident.  

  • UK domicile of origin

Individuals born in the UK with a UK domicile of origin will now not be able to claim a foreign domicile of choice if resident in the UK.

  • Statutory rebasing on foreign assets

Individuals who become deemed UK-domiciled on 6 April 2017 might be able to benefit from a statutory rebasing on their foreign assets (if those assets were held on 8 July 2015) to the market value as at 5 April 2017. This rebasing, however, will only be available to long-term resident non-domiciles who have previously paid the remittance basis charge in any year prior to 2017. This provision will not be available to those who become UK-domiciled in years subsequent to 2017.

  • Overseas mixed fund bank accounts

Another benefit that the new rule proposes is a one-off opportunity to ‘cleanse’ overseas mixed fund bank accounts. A mixed fund is one that contains capital, income and/or capital gains. Once formed, it is almost impossible to remit the clean capital to the UK without suffering a tax liability.