The UK’s tax authority last week published a technical briefing on changes that were due to come into force next month affecting overseas trusts, which reveals that certain provisions that had been expected to have been in the Finance Bill will now be pushed back to a future date.
According to the technical briefing, which may be viewed and downloaded here, the “legislation to be published in a future Finance Bill” includes a number of items having to do with capital gains tax, settlements, and overseas trusts with non-UK-domiciled beneficiaries.
There are also “significant changes in the Bill published on 20 March from the draft legislation published in December 2016 and January 2017, in respect of the taxation of income and capital gains as they are matched to benefits paid out in trusts”, EY, the global accountancy network, said, in a guidance note published in response to the Finance Bill.
“Capital gains and foreign income will not be subject to UK tax where there are no payments out of certain qualifying trusts – known as ‘protected settlements’.”
The EY note goes on to examine other provisions included in the Bill, and with respect to the postponement of certain elements of the legislation that had been expected to have been included in the current legislation, it points out that “affected
individuals will be disappointed that there is not more clarity” on these matters “at this stage”.
The Institute of Chartered Accountants in England & Wales, meanwhile, noted in its own advisory note that it has “not yet been confirmed” whether the omitted provisions “will appear in Finance Bill 2018 or a later Bill”.
Changes affecting non-doms due in April
As reported, numerous changes affecting non-UK-domiciled individuals take effect in April, as much-discussed plans to go ahead with a new “deemed domicile” category comes into force.
This category will affect non-doms who have been resident in the UK for 15 of the past 20 tax years. In addition, British citizens who return to the UK will no longer be permitted to claim overseas residence.
As the Financial Times noted over the weekend, the case of returning non-dom Stuart Gulliver, the chief executive of the HSBC banking group, is proving to be a public example of how returning Britons can expect to be treated if they attempt to maintain their non-dom status while living in the UK.
“Born in Derby and educated in Oxford, he acquired a tax domicile of choice in Hong Kong after he moved there with HSBC in 1980,” the report notes.
“This allowed him to keep his offshore income…out of the tax system.”
However, last week “he lost a High Court battle to stop HM Revenue & Customs investigating how he has kept a tax domicile in Hong Kong since 1999, despite working in Britain the past 13 years”.
Even though Gulliver’s return to Blighty pre-dated the new rules, HMRC, the FT report makes clear, didn’t see a case for him to remain a “non-dom” for tax purposes.