Excluded Property Trust
We have a client who was UK born, lived abroad and adopted Swiss Domicile. Whilst there opened an Excluded Property Trust (advised by a Swiss adviser). Has since returned to UK and now UK res and Domicile.
HMRC proposals are saying:
The second aspect of the reforms to restrict access to non-dom status are the proposals which will affect those individuals who were born in the UK with a UK domicile of origin but who have acquired a domicile of choice elsewhere. The government does not believe that those individuals who were born in the UK with a UK domicile of origin should be able to benefit from the non-dom regime while they are resident in the UK. Legislation will be introduced so that from April 2017, an individual in this position will be treated as having a UK domicile of origin for tax purposes while they are resident in the UK.
The intention is that if the individual returns to the UK, they will be taxed as a UK domicile while they are resident here for tax purposes. The individual will continue to be treated as not domiciled in the UK while they are not UK resident.
This group of individuals will be treated as having a UK domicile for tax purposes. This means there will be no protection for offshore trusts, either in terms of the tax on income/gains in the trusts or for IHT purposes. The excluded property trust rules for IHT will be changed so that they do not apply in these circumstances. This will be the case even for trusts that are set up offshore while the individual was not domiciled or resident in the UK (and would therefore be excluded property for IHT purposes under the current rules). So if an individual caught by this test acquires an overseas domicile and then sets up an offshore trust while non-UK domiciled, once that individual becomes UK resident the assets in that trust will cease to qualify as excluded property and would be liable to inheritance tax charges.”
If these proposal come to fruition I think he is up the river without the necessary and his £1.6M trust assets are IHT-able (alongside a whopping chargeable gain if he surrenders the offshore bonds).
Any ideas thoughts. EIS away some of the chargeable gain, perhaps some BPR too to get stuff outside estate ASAP. DGT / Flexible Trust the rest and hope he survives 7 years...?