Union Jack

Non-dom drama. New non-domiciliary rules for the UK.

Following HMRC’s release of their timely 2014/15 statistics, (this August), which established that non-domiciled taxpayers contributed £9.3bn in tax receipts, the new deemed domicile rules have been confirmed effective as of 6 April 2017 with the publication of Finance (No 2) Bill 2017.

The new rules add further complexities to an already challenging tax environment and will be an area that many non-doms should be seeking professional guidance on. Outlined below is a brief summary of the changes and the main points non-doms should be considering, but please get in touch if you would like to discuss this in more detail.


The deemed domicile rules apply to non-doms who:

  • have been UK resident for at least 15 of the previous 20 tax year (“15 out of 20 rule”)
  • were born in the UK with a UK domicile of origin (normally acquired from your father), and have since lost their UK domicile status, at any time they are resident in the UK (“formerly domiciled resident”).


What do the new non-domiciliary rules mean for those affected?

Currently, non-doms are taxable on their worldwide income and gains unless they elect to use the remittance basis (RB). By claiming the RB, non doms are only taxable on their UK income and gains as well as overseas income and gains remitted to the UK.

Although non-doms who have been resident for at least 7 of the previous 9 tax years suffer a charge of £30,000 if they wish to claim the remittance basis (increasing to £60,000 for non-doms resident at least 15 of the previous 20 years), claiming the RB is still beneficial to many non-doms.

Under the new rules, those caught under the deemed domicile rules will not be able to use the RB meaning they will be assessed to UK tax on their worldwide income and gains.

What should non-doms be doing as result of the new non-domiciliary rules?

Consider if, or when, these rules will apply to you

Although the rules have already been in effect for some months, there is still time to consider your position and take action. Non-doms should review their position to identify when the 15 out of 20 rule will apply to them. Alternatively, non-doms born in the UK who have not previously considered their domicile of origin position should do this now.

Rebasing of assets for capital gains tax (“CGT”)

For non-doms caught under the 15 out of 20 rule, any overseas assets held at 5 April 2017 will have their base cost restated to their market value at 5 April 2017. This treatment will apply automatically although an election to dis-apply this rule, perhaps because the value of the asset has decreased, is available.

This election must be made by 5 April 2021 therefore, although non-doms may not be intending to dispose of any assets at this time, they should consider having their overseas assets valued in order to determine whether this election will be relevant to them.

Additionally, in order to benefit from this rebasing, individuals must remain deemed domicile in the UK from 5 April 2017 until the asset’s disposal. Therefore non-doms may wish to consider disposing of qualifying assets now to ensure they do not lose this relief.

This rebasing is not available to formerly domiciled residents who should consider restructuring their holdings before returning to the UK.

Clearing of mixed funds

Non-doms who have previously claimed the RB may find themselves with mixed funds, being offshore accounts which consist of various different sources of income or gains. Rules apply to determine the order of any withdrawals from the mixed funds however HMRC has introduced a provision to allow non-doms to cleanse their mixed funds whilst disregarding the existing rules.

Although this provision only applies to those caught under the 15 out of 20 rule, and is subject to a number of conditions, this is a useful tool to help to organise their overseas cash in order to bring money back to the UK in the most tax-efficient manner. Affected non-doms will have until 5 April 2019 in order to cleanse their funds, therefore those effected need to be considering these rules now.


Changes to deemed domicile

The concept of deemed domicile is not new to IHT, currently this applies where an individual is resident at least 17 of the prior 20 years. In order to align with the new rules affecting IT and CGT, this has been decreased to 15 of the prior 20 tax years. Although transitional provisions have been introduced to avoid catching non-doms who left the UK prior to 6 April 2017 whilst they remain non-resident.

Additionally, individuals who are currently non-dom but were born in the UK domicile of origin, will be deemed domicile for IHT if they are UK resident and were also resident in one of the last two tax years.


Many existing anti-avoidance provisions relating to offshore structures (such as trusts) will be tightened by the introduction of the deemed domicile rules for IT and CGT. In additional new rules have been introduced which will bring UK residential properties held in offshore structures in to the UK IHT regime from 6 April 2017.

Both settlors and beneficiaries of offshore trusts should seek advice to ensure they are not caught out by the new rules.


Get started today

Contact us today and speak to our expert team to get started

close slider