The British government has proposed new inheritance tax (IHT) rules for non-domiciled individuals, to prevent them from escaping IHT charge on UK residential property by using an offshore entity.
The government now plans to bring UK residential properties within the charge of IHT even if they are held within an overseas structure.
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The changes are expected to be effective from 6 April 2017.
“This charge will apply both to individuals who are domiciled outside the UK and to trusts with settlors or beneficiaries who are non-domiciled,” the government said.
The government plans to remove UK residential properties owned indirectly through offshore entities from being considered as excluded property provided by the Inheritance Act 1984.
Once the law is effective, shares in offshore close companies and similar entities will not be deemed as excluded property. At the same time, a property will no longer be deemed as excluded for the purposes of IHT when a non-domiciled individual is a member of an overseas partnership that holds a British residential property.
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By GlobalDataThe government has opened a consultation on the new IHT rules that will run until 20 October 2016.
“Post EU referendum, the aspiration for a tax system that balances fairness and international competitiveness remains the same, and the government believes it is still appropriate to proceed with these reforms,” the government said.
The proposed rules also says that if a non-dom had been in the UK for 15 out of the past 20 tax years then they shall be ‘deemed domiciled’ for tax purposes.
