The new rules bring an end to the permanency of non-dom status and will mean that those who have chosen to make the UK their long-term residence will pay tax on the same basis as UK domiciles. The rules do, however, allow for some flexibility to continue to reflect the fact that some non-doms are internationally mobile.
Maximise Time Spent in UK
The proposed rules make provision for individuals who have lived in the UK for 15 consecutive tax years and then leave the UK for 6 or more consecutive tax years, meaning that they could return to UK and claim non-dom status again for another 15 years (assuming they still had a foreign domicile status under general law).
The government has stated that introducing the deeming rule in this way will allow those non-doms who are internationally mobile to continue to benefit from non-dom status in a way that is not appropriate for those who are firmly based in the UK.
In light of these reforms, UK non-dom individuals should reconsider their tax residence position before April 2017. An effective strategy to pursue in order to prevent being negatively affected could be to cease to be UK tax resident for a period of time, and to therefore divert UK deemed-domiciled status.
It is possible for individuals who cease to be UK tax resident for 6 years to lose their UK deemed-domiciled status. Should these individuals then, at a later date, wish to return to being UK tax resident, this strategy will allow them to "reset the clock", as it were, thereby restarting the year count for the deemed-domiciled test.
If you decide to cease being a UK tax resident, you will likely hope to continue to spend time in the UK for personal or business reasons. Gibraltar is an attractive jurisdiction to consider as an alternative residence if you are looking to: avoid language barriers; have access to quality education and health services; ensure an equal or improved lifestyle; remain close to family and friends who are mostly in Europe; have a reasonable corporate and personal tax regime; have access to highly-qualified professionals and recognised institutions within an efficient financial sector.
Gibraltar: The Ideal Jurisdiction
Gibraltar offers a unique set of advantages for individuals seeking to establish residency. Enjoying a Mediterranean climate and located at the southernmost point of the Iberian Peninsula, this self-governing British overseas territory boasts a robust and diversified economy and has emerged as a leading international financial centre. Gibraltar has replaced its former tax exempt regime with an internationally competitive tax model, and is garnering ever-growing favour as a transparent, compliant and internationally-cooperative jurisdiction for businesses and "fiscal nomads" looking for legitimate ways to lower their tax bill in a properly regulated environment.
Qualifying (Category 2) Status - Cat 2
This status for High Net Worth Individuals (HNWIs) was introduced in February 1992 by the Government of Gibraltar through the introduction of new low tax limits for HNWIs in order to encourage these individuals to establish a residence in Gibraltar.
Who Would Benefit?
The benefits of the Category 2 status and residency in Gibraltar are especially attractive for individuals from countries where levels of personal income tax are particularly high, such as Britain.
A Category 2 Individual will have their Gibraltar tax capped to the maximum calculated on the first £80,000 of assessable foreign income, with a minimum tax payable per annum of £22,000. In the first year of assessment the minimum tax payable under the new Rules shall be £1,833.33 (1/12) for each complete or part month for which the certificate is in force in that fiscal year.
In order for an individual to qualify for Cat 2 status they will be required to have available for their exclusive use approved residential accommodation in Gibraltar for the whole of the year of assessment (July to June). In addition, an applicant must submit a Curriculum Vitae detailing their qualifications, source of wealth and income, work experience and 2 references to vouch for their good financial standing and repute. One must be from a Banker confirming that the individual's financial status is in excess of £2,000,000. Each applicant will also have to satisfy the authorities that they hold private medical insurance.
Additional Noteworthy Benefits
Regardless of an individual's tax category, interest arising from a licensed bank or building society or dividends arising from companies quoted on a recognized stock exchange are not taxable in Gibraltar. There is no Wealth Tax, Capital Gains Tax, Gift Tax or Estate Duty in Gibraltar and no tax on the remittance of capital to Gibraltar.
Download our full guide on potential solutions for non-doms here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.