Wealthy non-doms living in the UK could pick up a welcome tax fillip when their domicile status changes under new rules starting in April 2017.
From that date, non-doms who have lived in Britain for 15 of the 20 years stretching back to 1997 will automatically have their status switched to domiciled in the UK.
With the nom-dom change, they become tax resident in the UK, and any assets they hold overseas are rebased at their value on April 6, 2017.
Capital gains tax is then only due on any gain in value made after that date.
So thousands of pounds of stored up taxable gains made over the years in overseas property, bank accounts or investments are written off by HM Revenue and Customs.
Hidden CGT concession
For non-doms already in the UK and planning to take advantage of the status change, the best advice is to hold on to any assets that have seen a major increase in value for another tax year.
For example, if a non-dom bought a property overseas for £500,000 in 2010 and the value has increased to £650,000, capital gains tax is paid on the gain of £150,000 less expenses.
From April 6, 2017, this changes as the property value is listed as £650,000 and capital gains tax is only due on any gain on this amount.
Any capital expenses are included in the rebased value.
Move costs Treasury £20m
When disposing of assets, non-doms will have to show an April 6, 2017 valuation to HMRC.
Tax specialists warn that Chancellor George Osborne could close this lucrative tax option when the details of the tax changes for non-doms are revealed in draft legislation later in the year.
“It’s very much a game of wait and see,” said Racheal Griffin, of Old Mutual Wealth.
“As it stands, the budget announcement is good news for non-doms with overseas assets, but this could change and the longer they hold on to assets, the trickier disposal could become in the countdown to April 2017.”
The measure is expected to cost The Treasury around £20 million a year in lost revenue.
Meanwhile, HMRC has announced an extra £154 million in undeclared capital gains tax was collected last year following a crackdown in compliance.
