Occasionally, the UK government amends the rules governing Inheritance Tax (IHT). Differing Governments will often take an alternative view in terms of how tax law should be created and applied. It was announced that there are to be further changes to how IHT applies to non-domiciled individuals – those who are domiciled outside of but have
interests inside the UK.
What is the Government doing?
Back in the Budget of 2015 the Government announced that it would be changing the tax rules as they apply to ‘non-doms’. At the moment non-domiciled individuals who own residential property in the UK, through the use of an offshore company or other vehicle, are not due to pay any inheritance tax (IHT) on that property.
The Government consulted on this situation and stated that as a result of this, non-domiciled individuals enjoy a significant advantage over other people: people domiciled in the UK are due to pay IHT on all of their property, while non-domiciled individuals are only on their UK property.
As of April 2017, the government intends to ‘close this loophole’ by removing UK residential properties that are owned indirectly through offshore corporate structures from the definition of ‘excluded property’ for IHT purposes. The effect will be that individuals that own shares in an offshore company that in turn owns UK property will need to pay IHT on it.
What does this mean?
This is the latest move by the UK Government, in what has been a long and sometimes, controversial debate about the taxation of individuals that are not domiciled in the UK but have interests that are located here. Whether the Government’s intentions are for the better or worse ultimately depend on your specific circumstances.
Individuals that had previously enjoyed relief from IHT under the current tax regime may need to reassess their situation, and may question whether or not it remains desirable to maintain UK assets in light of the impending change to tax law.
Who do you choose to manage your financial affairs?
Inheritance tax can be difficult to understand, not least the many changes and alterations to the rules. Gemini understand that your main concern is to ensure that the money you earn and assets you own are dealt with fairly and taxed at the appropriate level.