Non-UK doms tax policy update

HM Treasury yesterday announced that there will be a Budget on 30 October 2024 and released a series of policy papers, including an update on the changes to the taxation of non-UK domiciled individuals.

The new Labour government is committed to abolishing the remittance basis of taxation from 6 April 2025 and will introduce a foreign income and gains (FIG) regime broadly in line with the policy initially announced by the Conservative government in the March 2024 Budget (we have analysed these announcements in a separate article).

In summary, the key policies announced yesterday by the Treasury in respect of income tax and capital gains taxes were as follows:

• As previously reported in the media, the government will not enact a transitional relief for those taxpayers losing the ability to claim the remittance basis in 2025-26 by reducing their foreign income by 50% for the tax year.
• Whilst the government will look to enact the Temporary Repatriation Facility (TRF) to allow current and historic remittance basis users to remit their unremitted income and capital gains to the UK, the government intends to review the applicable tax rate and length of time that the TRF will be available. This may therefore differ from the 12% tax rate for the two-year period from 6 April 2025 to 5 April 2027 announced by the Conservatives. The Labour government is, however, looking to extend TRF to stockpiled income and gains within overseas structures. Further details will be announced in the October Budget.
• The proposal by the previous Conservative government was for non-UK doms to be able to rebase their assets to 5 April 2019. Whilst the Labour government has confirmed that there will be rebasing for current and past remittance basis users on their foreign assets, the date of the rebasing will be reviewed and announced in the Budget.
• There will be a review of offshore anti-avoidance provisions which apply to overseas structures to ensure they are fit for purpose. It is however intended that these changes will only come into effect from April 2026-27 at the earliest.

The government’s announcement also confirmed that the inheritance tax (IHT) regime will move from a domicile-based system and is intended to be replaced with a residence-based test from 6 April 2025; Labour will pursue this change largely based on the rules previously announced.

In summary, the changes announced with regards to IHT are as follows:

• The test for determining whether an individual’s assets are within the scope of IHT will be whether a person has been resident in the UK for ten years prior to the tax year in which the chargeable event arises. There will also be a ten-year tail for individuals leaving the UK.
• As previously reported, the government intend to end the use of Excluded Property Trusts to protect assets from IHT. It appears that the government is intending to move away from the position of using the settlor’s status at the date of settlement to determine the IHT status of a trust, although the position is not yet clear. The government did acknowledge that individuals will have established trusts based on the current rules and will therefore consider how the changes can be implemented to achieve their policy whilst allowing an appropriate adjustment for existing trusts. It is intended that transitional arrangements for those impacted will be announced at the Budget.
• There is no longer an intention for there to be a full consultation on the new IHT regime; instead HM Treasury and the government will review stakeholder feedback following the Spring Budget and undertake further external engagement over the summer on the policy design.

If you would like any further information on the points raised, please get in touch with your usual Saffery contact or speak to Steven Coelho or Alexandra Britton-Davis.