Once an individual has been UK resident for 12 (out of the previous 14) tax years, the charge goes up to £60,000 per year, which means the number of non-doms who continue claiming the remittance basis after 12 years significantly reduces.
Once the individual has been resident 15 out of the previous 20 tax years, they can no longer claim the remittance basis, become “deemed domiciled in the UK” and are accordingly taxed on a worldwide basis – known as the 15-year rule.
This 15-year rule was only introduced in April 2017 and prior to that there was no time limit for continuing to claim the remittance basis. It is possible to restart this 15-year clock after six years of non-UK tax residence.
The concept of domicile is very personal, and involves looking into the individual’s family background, and to which jurisdiction(s) they have social, cultural and economic ties. There has to also be a clear intention about when the individual will leave the UK.
For some who come to the UK attracted by the remittance basis, their intention may be to leave after 15 years, on retirement or when their children/grandchildren have completed education here. The burden of proof is on the taxpayer, and the well-advised non-dom will collate evidence regularly to support their non-dom status.
HMRC enquiries into domicile status can be painful where advice was not sought by the individual, as it can be difficult to obtain evidence many years later (potentially after the death of the taxpayer) as to where the individual’s father was living, working etc, and what their intention was.
Many caught out by changing times
It is possible to become deemed domiciled here before 15 years of UK residence, by a non-dom’s intention changing from being in the UK temporarily to wanting to live here permanently or indefinitely.
Historically, individuals with parents from the UK and who were born in the UK would be able to claim non-dom status both during a period of residence outside the UK and when they returned to the UK. This interpretation of the domicile rules attracted criticism (examples include Lord Ashcroft relying on a Belize domicile) and was curtailed by legislative changes in 2017.
These changes also impacted individuals born in the UK with a UK domicile of origin who settled offshore trusts while they were non-UK resident, but subsequently returned to live in the UK. In our experience, many of these individuals (now elderly) have not realised that their offshore structure no longer provides the tax advantages they were promised previously.
