From 2017, all UK residential property owned, directly or indirectly, by foreign domiciled persons will be subject to IHT of 40%. Additionally, those properties owned through an indirect structure, such as an offshore company or trust, will also be liable to UK inheritance tax. No doubt this could be an unwelcome surprise for descendants and beneficiaries.
Traditionally, non-doms would structure the ownership of residential property in the UK through offshore companies to safeguard against UK inheritance tax. But with the tightening of rules on non-doms announced in July’s Budget, there was a fear if many, or in fact any of the privileges would remain.
Yet with proposals launched in the Government’s consultation, which uncovers plans to leave offshore trusts outside of the tax net, there is an air of promise on the horizon.
Whilst a relaxation of rules for offshore trusts is welcome, the proposal still leaves existing and future owners exposed to Capital Gains Tax (CGT), Annual Tax on Enveloped Dwellings (ATED), and other tax burdens.
It is imperative, therefore, that those who may be affected seek professional tax advice sooner rather than later. With a constantly shifting tide, it’s vital all UK property owners are prepared for the next wave of change.