The Death Knell for Offshore Structures Holding UK Residential Property

Following the proposed changes in the Summer Budget now is the perfect time for non-domiciled clients to review their existing offshore structures and planned domicile status.

As the ‘dust’ settles it is obvious that the Summer Budget has brought with it a huge headache for non-domiciled clients.

By April 2017, as well as being subject to local taxes, non-doms will be liable for UK inheritance tax  if they own ‘enveloped’ UK residential property through an offshore corporate structure.

Clients will now also be caught by the full scope of the UK tax net if they are resident in the UK for 15 out of 20 years, or immediately if they return having had an original domicile in the UK.

The death knell may well have sounded for offshore corporate structures holding UK residential property and non-domiciled clients should seriously consider whether they need to ‘de-envelope’.

However, clients should be cautious as accrued CGT and SDLT liabilities on transfers could make matters worse.

The Government may bring in some relief nearer the time but meanwhile the list below details the action non-domiciled individuals should be taking:-

• Review offshore structures including trustees powers;
• Obtain valuations for enveloped UK residential property;
• Obtain valuations for UK residential property held directly by a non-domiciled individual;
• Consider diversifying the asset type held by their offshore structure;
• Consider taking advice in regard to QNUPS;
• Consider using dry lending to purchase residential property to minimise capital exposure;
• Consider domestic UK tax planning techniques – gifting, IHT exemptions;
• Consider purchasing insurance to cover the IHT liability;
• Review domicile status.

We are delighted to be able to offer non-domiciled clients a complimentary post Budget review to go through the changes and how these relate to their offshore structures.

This will provide reassurance to non-domiciled clients that their existing structures are appropriate and relevant, or empower them to make changes as appropriate.