Non-dom tax changes – IHT periodic charges and offshore trusts

Well advised non-doms know that UK situated assets should never be directly held by their offshore discretionary trusts.  To do so would subject the offshore trust to periodic charges to UK Inheritance Tax (IHT).  These charges comprise the entry charge, the ten year anniversary charge, and exit charges, where value leaves the trust after creation.

To avoid these charges arising, it has been commonplace for UK situs assets, such as UK real estate, to be owned by an offshore company, which in turn is wholly owned by an offshore trust.  The trust’s asset is the shares in the offshore company – non-UK situs, so the trust is not subject to periodic IHT charges as it does not directly own UK situated assets.  As a result, many non-doms have no understanding of what periodic charges are and when they apply.  However, if the Government’s proposals in their August Further Consultation come to pass, ignorance of IHT periodic charges could cost non-doms and their offshore trusts.

Charitable giving in Wills: charity must be governed by UK law to secure IHT exemption

The UK Inheritance Tax (IHT) saving is probably the last reason why anyone would deliberately choose to leave assets to charity in their Will.  However, it is the case that leaving assets to charity is very IHT efficient, for two key reasons.  Qualifying gifts are 100% IHT exempt – the charity will not have any IHT deducted from what is left to them.  In addition, from April 2012, the estate of anyone leaving at least 10% of their net estate to charity benefits from a reduced IHT rate of 36%.  The recent Court of Appeal case of Routier & Anor v HMRC ([2016] EWCA Civ 938) is a reminder, though, that, where the Will contains a foreign element, it is dangerous to assume that the IHT charity exemption will be automatic.

Long term UK resident non-doms set to lose remittance basis of taxation

Anyone who does not regard England as their permanent home (non-dom) but who has been resident in the UK for at least 15 out of the past 20 income tax years will wake up to a very different UK tax regime on 6 April 2017, according to a further consultation issued by the Government on 19 August. 

Contributed to a property purchase? Here’s how to protect your investment

Buying a property is often the biggest investment a person will make in their lifetime.  It therefore stands to reason that people want to ensure that their investment is protected.  The recent case of Haque v Raja[1] provides a reminder that, if you don’t appear on the title of a registered property that you’ve contributed to and you don’t live in it as well, you must protect your interest.

UK residential properties held through offshore structures: a call to action

Owners of UK residential property held through offshore structures, including non-UK companies and partnerships, should urgently review their structures following the publication of a further consultation by the UK Government on 19 August 2016.  The consultation confirms that residential properties in these structures will be exposed to UK Inheritance Tax (IHT) from 6 April 2017.  The aim of the changes is to bring all UK residential properties within the charge to IHT.


For more detail on the proposal, read my briefing note available on Fladgate's website via this link: https://www.fladgate.com/rFlVC

Trusts and the revised 4AMLD

In my 26 November 2015 blog, I wrote about the impact on trusts of the EU’s first draft of the Fourth Anti-Money Laundering Directive (4AMLD).  It seemed that only if the trust generated ‘tax consequences’ would the trustees have to provide details about the trust to a central register, which would not be publicly available.  However, a revised version of the draft 4AMLD was published by the European Commission on 5 July and it envisages public access to trust beneficial ownership information for certain trusts only.  The coming into force of the 4AMLD is brought forward to 1 January 2017, from 26 June 2017.

Brits abroad! Will planning for Brits with foreign assets

With the summer holiday season upon us, it’s time to dust down those dreams of owning a bolthole in your favourite part of the world, where summer means summer and the sky is always blue.  It’s not uncommon for Brits to own assets outside the UK these days and not just the infamous holiday home in the sun.  In acquiring assets abroad, though, the last thing usually considered is what happens to those assets on death and is an English Will any use in getting them sorted out?