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Updated support on the taxation of foreign domiciliaries

9 February: ICAEW has joined forces with STEP, CIOT and The Law Society to create and update a series of guidance notes on the uncertainties in the taxation of foreign domiciliaries introduced by Finance Act (No. 2) Act 2017 and Finance Act 2018.

An already complex area of law, the tax treatment of foreign domicilaries and non-UK residents was further complicated by significant changes, notably the anti-avoidance provisions, enacted by Finance (No. 2) Act 2017 and Finance Act 2018.

Since its introduction, representatives from ICAEW, STEP, CIOT and The Law Society of England and Wales have worked together to provide free practical guidance on the areas of uncertainty, with the latest published on 1 February.

Published by ICAEW as TAXguide 02/21 and TAXguide 03/21, the updated guides focus on trust protections.

TAXguide 02/21 aims to provide support on common queries about the changes and covers a range of issues from the interpretation of ‘provided’ to whether ongoing work or employment by the settlor taints a protected settlement. Other issues covered include: guarantees, property management, investment suggestions, and loans to or from underlying companies.

TAXguide 03/21 meanwhile focuses specifically on the situation where the settlor is deemed UK domiciled only under the 15-year rule and offshore income gains arise directly to a non-UK resident trust.

This guide provides background before examining the technical issues and tax return filing. It also provides an insight into enquiries that have been opened by HMRC and contact details for taxpayers interested in joining a potential test case.

The remaining guides in the series were published across 2019 and 2020 and cover:

  • Inheritance tax on overseas property representing UK residential property (TAXguide 11/20).
  • Rebasing and adjustment to the capital gains tax foreign capital losses election (TAXguide 09/19).
  • Finance Act 2018 section 35 and Schedule 10 – settlements anti-avoidance (TAXguide 03/19)
  • Cleansing of mixed funds (TAXguide 02/19).

The guides are all freely available and, where possible, the bodies have worked with HMRC’s support. TAXguides 02/19, 09/12 and 11/20, for example, are formatted as a series of questions and answers upon which HMRC has made comments. These comments are included in the guides.