Michelmores
2 Experts
4 Contributions by Michelmores Experts
PRACTICE NOTES
STOP PRESS: Abolition of non-dom regime and introduction of residence-based IHT regime
Finance Act 2025 (FA 2025), which received Royal Assent on 20 March 2025, enacts the removal of the remittance basis of taxation and introduces a residence-based system from 6 April 2025. FA 2025 also makes residence, rather than domicile, the primary criterion for inheritance tax liability.
Other updates include:
Changes to the rules for assessing excluded property status
Abolition of the protected settlements status for offshore trusts
Amendments to overseas workday relief
For details on these reforms, see Practice Notes: The abolition of the remittance basis of taxation from 2025–26 and A new residence-based regime for IHT from 2025–26. See also: Finance Bill Tracking Service: Key dates (Finance Bill 2025) and Finance Act 2025.
The trustee borrowing rules, brought in during 2000, targeted a planning device known as a
Private Client
PRACTICE NOTES
STOP PRESS: Abolition of non-dom regime and introduction of residence-based IHT regime
Finance Act 2025 (FA 2025), which received Royal Assent on 20 March 2025, brings into law the abolition of the remittance basis of taxation and puts in its place a residence-based regime, taking effect from and commencing on 6 April 2025. Under FA 2025, domicile ceases to be the decisive criterion used in establishing liability to inheritance tax. Additional measures in FA 2025 comprise changes to the rules for excluded property status, the ending of protected settlements status for offshore trusts, and revisions to overseas workday relief. For guidance on these updates, see Practice Notes: The abolition of the remittance basis of taxation from 2025–26 and A new residence-based regime for IHT from 2025–26. See also further: Finance Bill Tracking Service: Key dates (Finance Bill 2025) and Finance Act
Private Client
PRACTICE NOTES
Capital payments are generally taxed by setting them against available relevant income (ARI), offshore income gains (OIGs) and then capital gains, in that sequence respectively. Accordingly, where a trust has no ARI, distributions are matched first with OIG figures and ultimately with amounts then referable to section 1(3) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) (formerly s 2(2)), and those arising under TCGA 1992, s 87 or Schedule 4C. For commentary on OIGs, see the Practice Note: Offshore trusts—offshore income gains (OIGs). For guidance on matching capital payments, see Practice Notes: Offshore trusts—matching capital payments—section 87 TCGA 1992 and Offshore trusts—matching capital payments where the trustee borrowing rules apply—Sch 4C TCGA 1992.
Where there has been a transfer between settlements, the OIG figures and the s 1(3) amounts within each settlement are correspondingly adjusted accordingly. Accordingly, the tax treatment of any
Private Client
PRACTICE NOTES
STOP PRESS: Abolition of non-dom regime and introduction of residence-based IHT regime
Finance Act 2025 (FA 2025), which secured Royal Assent on 20 March 2025, brings an end to the remittance basis of taxation and installs a residence-based framework from 6 April 2025. For IHT, FA 2025 removes domicile as the primary driver of liability, establishing a residence-focused model instead.
Revisions to the rules for determining excluded property status;
Abolition of protected settlements status for offshore trusts; and
Amendments to overseas workday relief.
For details on these measures, see Practice Notes: The abolition of the remittance basis of taxation from 2025–26 and A new residence-based regime for IHT from 2025–26. See also: Finance Bill Tracking Service: Key dates (Finance Bill 2025) and Finance Act 2025.
Capital payments made by an offshore trust to beneficiaries who are UK resident and domiciled are subject to a
Private Client
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