UK Budget briefing 2015

Friday 10 July 2015

by Managing Director - Helen Woods, Equiom Solutions

The first Budget following the election of a Conservative Government in May this year introduced some important tax measures which may impact on offshore structures. While certain existing offshore structures and future planning will be affected, the new proposals have a limited effect and good planning opportunities remain.

The first issue concerns trusts and/or company structures that own UK residential property established by non-UK domiciled persons. The following points should be noted:

  • It is only structures holding UK residential property that are affected
  • Structures holding UK commercial property or other UK assets, for example, investment portfolios, are outside the scope of the proposed changes
  • Consultation - the proposed changes are going to consultation and the Government have already indicated that they will consider the costs associated with de-enveloping a structure
  • The proposed changes will only come into effect from April 2017

Whilst clearly action needs to be taken well before the April 2017 deadline, this does provide time to consider the outcome of the consultation, discuss alternative structuring or dismantling
of existing structures, if appropriate.

The effect of this proposal is that offshore companies and certain other offshore structures holding UK residential property will no longer provide a UK inheritance tax shelter for UK residential properties.

The second issue is the introduction of a deemed domicile for all taxes for non-UK domiciled individuals who have been resident in the UK for more than 15 years.

  • Despite the headlines, non-UK domiciled status remains, the beneficial remittance basis is still in place and the use of trust structures for capital gains tax and UK inheritance tax planning is still available for the majority of assets
  • The proposal is being put out to consultation
  • The proposal only comes into effect from April 2017

The effect of the proposal is that long-term UK resident, non-UK domiciled beneficiaries, settlors and shareholders will not be able to avail themselves of the remittance basis. This will affect
settlors, beneficiaries and shareholders receiving distributions or capital payments from trust/company structures. There will also be an impact on the rules of deemed domicile for UK inheritance tax purposes.

In the meantime, we will keep you up-to-date in respect of the draft legislation and the consultation process.