Deemed UK-Domiciled Rules Now in Effect | KPMG | CA
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Deemed UK-Domiciled Rules Now in Effect

Deemed UK-Domiciled Rules Now in Effect

A new tax reform for non-UK domiciled individuals took effect on April 6, 2017.


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Long-term UK residents who are not domiciled in the country will now need to pay UK tax on foreign-sourced income and realized gains. This article explains which individuals may be affected and also covers the forms of relief that are available under the new regime. It also summarizes rules that were introduced in a few related areas.


New Deemed UK Domicile Regime

This reform was introduced in the 2015 UK budget. Under the new policy, long-term UK residents and "UK Returners" (i.e., generally, individuals who were born in the UK with a UK domicile of origin, but have left the UK and acquired a domicile elsewhere, and later return to the UK) may be taxed on their worldwide income and gains in the same way as individuals who are domiciled in the UK under general law. The remittance basis of taxation of foreign-sourced income and gains will no longer be available to them subject to a £2,000 de minimis rule. Previously, under the remittance basis of taxation, non-UK domiciled UK resident individuals were generally not taxed by the UK on foreign-sourced income and gains that were not brought (remitted) to the UK.

Under the new rules, foreign income and foreign gains realized before the tax year in which an individual becomes UK resident and is deemed domiciled, and in respect of which the remittance basis is claimed, will still only be subject to UK tax if they are brought into the UK.

Deemed UK domiciled

A non-UK domiciled individual will be deemed UK domiciled for UK income tax and capital gains tax purposes if:

  • The individual has been tax-resident in the UK for at least 15 of the previous 20 tax years (15/20 test), or 
  • The individual was born in the UK, has a UK domicile of origin and is UK tax resident in the relevant tax year after April 5, 2017 (referred to as UK Returners).

Individuals will lose their deemed-UK domiciled status if they emigrate from the UK and are not resident in the UK for at least six consecutive tax years thereafter.

If an individual loses their deemed-UK domiciled status, they may use the remittance basis of taxation until they meet the 15/20 test again, but only if they keep their non-UK domiciled status under general law.

Relief under new rules

There are two transitional relief measures available to non-UK domiciled UK resident individuals who have previously claimed the remittance basis and who are subject to the new rules as of April 6, 2017. Neither of these will apply to UK Returners.


Non-UK domiciled UK resident individuals who meet certain conditions may be able to revalue or rebase their offshore capital assets to their market value on April 5, 2017, for tax purposes. This ensures that only gains accruing from April 6, 2017 onwards would be subject to UK capital gains tax or income tax.

Mixed funds

Non-UK domiciled UK resident individuals who meet certain conditions may rearrange mixed funds held in non-UK bank accounts and transfer the constituent parts (e.g., the untaxed income, untaxed capital gains, and capital elements) to separate accounts. This allows individuals to bring capital from overseas into the UK without a tax charge; previously these individuals would have been taxed on the remittance basis.

Offshore trusts

The UK introduced a "protected" trust regime that limits the effect of the new deemed domicile regime on offshore trusts set up by individuals before they become deemed domiciled in the UK. However, protected status will not apply to trusts settled by UK Returners.

Inheritance tax on UK residential property

Effective April 6, 2017, UK inheritance tax will apply to UK residential properties that are owned indirectly by non-UK domiciled individuals through non-UK close companies (generally controlled by five or fewer persons) and overseas partnerships. Previously, these properties were not subject to the inheritance tax.


For more information, contact your KPMG adviser.


Information is current to April 18, 2017. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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