Update on the proposed changes to non-dom status for tax purposes

On Wednesday 8 April the Labour Party announced that it would abolish ‘non-dom’ residency for tax purposes if elected. There has since been a predictable amount of rather shrill politics.

However if you filter this out there seems to be quite a degree of consensus amongst the politicians, in particular:

  • non-dom status would remain for temporary residents; and
  • so-called ‘inherited non-dom’ status would be abolished.

That suggests that temporary non-doms will not be disadvantaged and those who have inherited non-dom status will be, whoever forms the next government. The variable then seems to be around the status of the rest of the non-dom population with longer term UK residence and non inherited status.

The second issue is how to legislate for this. Our view is that the most likely approach would be to introduce a deemed domicile rule (like the existing one for IHT). This would say that someone is generally deemed to be domiciled here for all tax purposes if they are resident for – say – five of the last eight years as well as if the reason for their non-dom status is an inherited domicile of origin.

So what seems likely to happen is that some taxpayers’ non-dom status may come to an end but that the architecture of the non-dom rules will remain largely intact.

It would be premature in almost all cases to act on these proposals at the moment but affected taxpayers may like to start thinking seriously about their options, at least in outline.
 9 April 2015