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For over two centuries, the UK’s non-domiciled tax regime and its remittance basis has been a cornerstone of tax planning for wealthy expats and international families. It was introduced, along with income tax, by Willian Pitt the Younger at the very end of the 18th century. It was part of the fiscal firepower necessary to battle Napoleon Bonaparte. And, like income tax, it had pretty much been a constant feature of the UK’s system ever since. But in March 2024, the then Chancellor, Jeremy Hunt, rang the death knell for the remittance basis, with Labour’s Rachel Reeves – who would succeed Hunt a few months later - declaring she would have abolished it anyway. The end is therefore very much nigh for the UK’s non-dom tax regime. More specifically, the end is 6 April 2025. However, out with the old and in with the new’ goes the saying. As such, the ‘what comes next’ will reshape the tax landscape for non-doms, expats, and international investors with a UK footprint (or those considering creating one). What is Domicile (and Non-Domicile)? Domicile is not a straightforward concept like tax residence. The latter is largely about physical presence (or otherwise) in a particular. Instead, as well as physical presence, it also requires an understanding of your future intentions. Is a place somewhere that you intend to live permanently or indefinitely. There are two main types of domicile that I will discuss here: • Domicile of origin: This is inherited at birth, usually from your father (if you think that is misogynistic then I don’t make the rules, OK?). You do not lose your domicile of origin. However, think of it as the foundations of a building. You can a domicile of choice on top it. • Domicile of choice: You build a new domicile of choice by achieving two things. Firstly, by physically residing in place and, secondly, by forming the intention to stay in that same place permanently or indefinitely. Both must be present.
So you’ve left the UK for pastures new. The sun is shining. You're making more money. You’re enjoying a great quality of life in a new country. In fact, you’re totally de-mob happy. Even better, as a non-UK resident, UK taxes are a dim and distant unpleasant memory, right. Right? Wrong. I don’t necessarily see my role in life as chief balloon popper. However, there are some Uk tax things you should bear in mind before declaring yourself a tax exile. Am I really non-UK Resident (“NR”)? Up until 2013, the UK didn’t really have a statutory definition of residence for tax purposes. Yes, that’s as crazy as it sounds. Fortunately, the Statutory Residence Test (“SRT”) was introduced from 2013. The idea is that it provides a degree of objectivity through a series of tests. Although a statutory test, other than in straightforward cases, it can still remain complex.
The UAE has become an attractive financial hub, drawing in high-net-worth individuals and businesses looking for wealth management strategies. Offering tax-efficient structures, world-class financial institutions and access to various markets, the UAE presents opportunities for those wishing to protect or grow their wealth. Your Risk Across Borders One of the key principles of wealth management is diversification. By spreading assets across various jurisdictions, both individuals and businesses can reduce exposure to regional economic downturns, currency volatility, or regulatory shifts that might threaten their assets. International wealth management ensures financial stability and flexibility to protect from unforeseen challenges in your future financial endeavours. Access Global Investment Opportunities. Broadening one's investment options beyond local choices can drastically expand wealth potential. The UAE serves as a gateway to exclusive global markets, offering access to various asset classes such as stocks, real estate, private equity and alternative investments. By employing strategic plans investors can take full advantage of these opportunities to diversify portfolios and maximise returns. Currency Diversification for Financial Stability Holding assets in multiple currencies is an effective strategy for protecting wealth. Currency fluctuations can have serious ramifications on purchasing power and investment value; by diversifying into multiple currency portfolios, individuals can protect themselves against depreciation and inflationary pressures. The UAE financial ecosystem offers access to numerous multi-currency investments to boost financial resilience. Geopolitical Hedging and Regulatory Stability Global economic conditions are constantly shifting, and regulatory changes in any country can have significant ramifications on financial security. Diversifying holdings among multiple jurisdictions provides a safeguard against geopolitical uncertainty while keeping assets secure regardless of market fluctuations locally. UAE regulatory framework facilitates this strategy with investor-friendly policies and financial instruments designed to safeguard wealth. Summary Wealth and financial planning in the UAE provide unique opportunities for growth, security and long-term prosperity. By taking advantage of global investment access, currency diversification and geopolitical hedging tools available today - individuals and businesses alike can safeguard and expand their assets with confidence. With expert assistance from Mosaic Chambers Group's Wealth Planning services you can create a tailored wealth plan tailored towards achieving your goals while protecting the future.
THE NEW RULES IT & CGT - The new 4 year Foreign Income and Gains (“FIG”) regime With the remittance basis of tax soon to be sent packing, we might wonder what, if anything, stands in its place? Indeed, Jeremy Hunt suggested a replacement regime which has been largely adopted as was by the new Labour Government. So, is this new regime akin to the dog’s naughty bits?.... or simply a dog’s breakfast? Well, in truth, we are probably somewhere in the middle. Sadly, we didn’t get anything quite as attractive as the regime on offer in Italy. But we did get something. What is this fiscal Newfoundland? Firstly, in line with the decision to largely banish domicile as a connecting factor from the tax code, a residence-based regime will take effect from 6 April 2025. Individuals who elect for this regime will not pay UK tax on foreign income and gains (FIG) for the first 4 years of tax residence. It should be noted that this will only apply to those who are coming to the UK for the first time or, at least, have not been resident in the UK in any of the previous 10 tax years. For those who became resident for tax purposes in 2022/23, 2023/24 and 2024/25 tax years (ie less than 4 years) they will be allowed to benefit from the regime until they have been resident for the balance of their first four years. Illustration – current remittance basis user interrupted by new FIG regime
“Every dog has its day… or century or two”: The end of the remittance basis of taxation etc PART TWO
THE PRE 6 APRIL 2025 RULES Individuals So, what are these favourable rules that are being scrapped? Firstly, various changes have taken place to the non-dom / remittance basis rules over the years. Each sortie by the legislator taking its toll on the attractiveness of these rules. As such, I will look at some of the history which, I aver, it might be useful to know. So, let’s see what we can Golden Retrieve from the memory banks. Income tax and Capital Gains Tax (”CGT”) The remittance basis simply provides the non-dom taxpayer with the privilege of leaving his or her foreign income and gains (“FIG”) overseas without any tax being paid. If he or she leaves it overseas then there is no tax to pay. However, if he or she brings, enjoys or uses the funds in the UK then they will suffer tax to the extent that they do so. If it is foreign income that is ‘remitted’ then it will suffer UK income tax. If it is a foreign gain that is remitted then it will suffer CGT. When the funds remitted were ‘mixed’ then special rules would apply. In order to use the remittance basis, one must make an election and potentially pay a fee to use it1. The amount payable depends on how many years one has been resident in the UK: less than 7/9 tax years: the remittance basis is ‘free of charge’; between 7/9 tax years and 12/14 tax years: the remittance basis charge is £30k if one has been resident in the UK for 12/14 or more tax years and 17/20 tax years then one must pay 60k. Prior to 2017, there was another tier of 17/20 tax years at which point the Remittance Basis Charge was £90k. However, this was scrapped when that years Finance Act created a long-stop date of being able to use the remittance basis of 15/20 tax years after which the ability to use the remittance basis was pulled (this was known as being deemed domiciled for income tax and CGT purposes). A taxpayer had flexibility to choose whether to pay the Remittance Basis Charge in one year and not another. It would simply be a ‘cost v benefit’ calculation for a particular tax year. Inheritance Tax (“IHT”) Under pre 6 April 2025 rules, IHT primarily looked one’s domicile position rather than residence. The position is that if one is domiciled in the UK then you pay UK IHT on worldwide assets. Whether that person is non-resident at the point of death is largely unimportant (unless also franked by valid claims to be non-UK domiciled). A non-domiciled (and non-deemed) individual is subject to IHT on UK assets only. Prior to 2017, a non-dom who had been resident in the UK for 17 out of 20 tax years would become ‘deemed domiciled’ for IHT purposes only. However, with the concept of ‘deemed domiciled’ being introduced for income tax and CGT as well, the threshold became 15/20 tax years across the board. The rules for trusts The concept of protected trusts was introduced in 2017. Let us first remind ourselves of the framework that preceded that one. The Pre-2017 position The basic position before 2017 was that a non-UK trust (other than in respect of UK residential property from April 2015) did not pay UK CGT regardless of where the asset was located. This is based on the fundamental jurisdictional basis of UK CGT. However, such a simple rule – which would be open to significant abuse if existed in isolation – was bolstered by a plethora of anti-avoidance rules2. Prior to 2017, those anti-avoidance rules: looked to attach the gains of the trust to a UK settlor under certain circumstances; or alternatively, looked to attach the gains of the trust to a UK beneficiary. Under those rules, where a settlor retained an interest (for ease, let’s say they may still benefit from the trust property) under a non-UK trust then the tax position depended on the settlor’s domicile position: a UK domiciled settlor: taxed on the trust gains as they arise (under TCGA1992, s86; a non-dom settlor was not Where the trust was not settlor interested then the anti-avoidance code switched its beady eyes to the beneficiaries of the trust. Specifically, it looked to see whether there was a link between the beneficiary and the UK: If the beneficiary was UK resident and domiciled then capital payments (or benefits) he or she received were matched with any trust gains and the beneficiary pays tax; If the beneficiary was non-dom then, he or she was only taxable (in respect of any capital payments or benefits matched with trust gains) on the remittance basis; If the beneficiary was non-dom and non-resident then the provisions (TCGA 1992, s87) were unlikely to impose a charge (subject to other anti-avoidance rules). IHT for trusts Under the pre-April 2025 rules, trusts established by non-domiciled individuals would benefit from the attractive excluded property regime to the extent that property in the trust was of a non-UK situs. Broadly, such property is outside of the scope of UK IHT status to the extent that the trustees hold non-UK assets. In addition, this includes trust property being outside of the Relevant Property Trust regime (eg 10 year / exit charge) for trusts. As to whether trust property was excluded property the domicile status of the settlor was tested only at the time the trust was established. So, if the settlor subsequently became deemed domiciled for IHT purposes, this did not matter. The trust property remained excluded property and outside of any person’s estate and was no relevant property. Finally, the Gift with Reservation of Benefit Rules (“GWROB”) were trumped by the excluded property rules. This meant that the settlor could retain an interest but the value of the assets would remain outside his or her estate. B.I.N.G.O. The position between April 2017 – 5 April 2025 & Protected trusts The basic position for trusts – whether considering income or capital gains - was no different to that which existed prior to 2017. However, again, the complications came when it comes to the anti-avoidance provisions at work. As we have seen above, under the previous rules, relief was given where non-doms were the settlors of such trusts and / or where such people received benefits from said trust. The rules between 2017-2025 had some additional problems to grapple. This was because it was in 2017 that the concept of ‘deemed domicile’ was introduced for income tax and CGT purposes. In other words, a long stop date to the benefits a non-dom can obtain. Of course, for those non-domiciled individuals who had set up trusts before they became deemed domiciled under the new rules , removing the reliefs described above from the trust anti-avoidance provisions would be a massive rug-pull. This ‘protected trust’ relief applied to those who set up trusts whilst non-dom but who became ‘deemed-dom’ in years from 2017/18 onwards. Under the CGT trust protections , s86 generally did not apply where a settlor became deemed domiciled under the new rules. This meant that whilst value is left within the trust there will be a gross roll up of gains. Instead, the tax position focused on capital payments or benefits actually paid out to beneficiaries. The tax treatment depended on which category of person the payment or benefit is made to: Close family members (spouses, co-habitees, minor children, not grandchildren): Other persons Where receipt is by a close family member then, if they were subject to tax on the receipt, then that was that. If not, for instance they were non-resident, then the Settlor was liable for tax. If the receipt was by an ‘other person’ then the tax position was dependent on the recipient’s status. Of course, if it is the settlor then he will pay tax based on his own position. Illustration – Protected trusts and CGT summary
“Every dog has its day… or century or two”: The end of the remittance basis of taxation etc PART ONE
Background – The British Bulldog v French Bulldog At the dying end of the 18th century, a little man with a big ego was throwing his weight around in Europe. His name was Napoleon. You might have heard of him. At the same time, William Pitt the Younger, at an impossibly young age of 24, was the UK’s prime minister. He wasn’t given a particularly easy ride as, at the same time, King George III was losing his marbles. In 1799, young Pitt introduced for the first time an income tax in order to pay for his fight with the angry little Frenchman. It was at this same time that he also introduced a remittance basis of taxation for overseas civil servants who, in today’s terminology, might be referred to as non-doms. The idea was to provide them with relief from these new taxes in relation to their overseas property. Little did young Pitt know that he was creating a political football and a fiscal tightrope for centuries to come. Something that would only be cast aside some 226 years later. So, it was a surprise when Jeremy Hunt the Beiger announced in Spring Budget 2024 the abolition of the remittance basis of taxation and, more generally, the removal of domicile as a main determining factor for UK taxation. It was perhaps less of a surprise when Chancellor Rachel Reeves, with a slightly less impressive CV (even the made up one) when compared to Pitt, flourished the pen to sign the non-dom demise. So, has the UK’s big tax dog finally had its day? A woof guide to domicile. So what is domicile and, by negative extension, non-domicile? Although, unusually, domicile has had an important impact on a person’s tax position in the UK it is not a pure tax construct. It is a concept of general law. It is therefore important to note that the proposed abolition of the non-dom tax changes are merely changes to the tax consequences of such a status. It does not change the position from a general law perspective. For example, they will apply to things like the law of succession and will even continue to be relevant for some double tax treaties. Dicey, in his tome Conflicts of Laws, provides the authoritative definition of domicile of origin: 'every person receives at birth a domicile of origin…A legitimate child born during the lifetime of his father has a domicile of origin in the country in which his father was domiciled at the time of his birth' In sum, one inherits a domicile of origin (“DO”) at birth. To use archaic terminology, where one is ‘legitimate’, then you inherit your DO from your father. Where your mother and father are not married, then a DO is inherited from one’s mother. A DO is rather sticky and tenacious. There must be strong evidence that a domicile of choice (“DC”) has been acquired elsewhere for it to be overtaken. Indeed, one does not completely shed a DO. Instead, think of the DO as the foundation of a building. It will remain as it is until someone takes the trouble to build something on top of it. A DC might be built on this foundation. Again, Dicey provides us with the commentary: ‘every independent person can acquire a domicile of choice by the combination of residence and intention of permanent and indefinite residence, but not otherwise’ As such, in order to build a DC, it is necessary to have: intention to reside permanently / indefinitely in a place; and physical residence in that place. Where this is the case, and can be backed up by evidence, the edifice will remain strong. However, where an element is missing then the walls will come tumbling down and you will be left with the foundations. In other words, your domicile of origin. But this is a double edged sword. What if little ‘ol me tried to assert I was domiciled in Spain? I have a domicile of origin in the UK (or should that be the People’s Republic of Yorkshire?) In order to develop a domicile of choice in Spain I would need to both be resident in Spain, but also show, and evidence, my intention to reside there indefinitely. Of course, if I came back, or even just hopped across the border to France, then I no longer reside there and would no longer have a DC in Spain. My DO in the UK would revert. And that simply wouldn’t Labra-doo. In part 2 of our series, we look at the pre-6 April 2025 rules, covering income tax, CGT, IHT, and trust regulations. Find out what’s changing, why it matters, and how it could impact your financial planning.
In 2025, the UAE is set to solidify its reputation as the ultimate destination for wealth, attracting an estimated 6,700 millionaires to its shores. This surge in high-net-worth individuals (HNWIs) is positioning the UAE as the premier global hub for the affluent, surpassing long-established wealth centres like the UK and the US. If you’re looking to relocate to Dubai or invest in the region, now is the perfect time to look at the opportunities it has to offer. What are the benefits of moving to the UAE? The UAE has become the go-to location for millionaires, and it’s not hard to see why: Tax Benefits: With no income tax and no inheritance tax, the UAE has a compelling financial advantage. If you are looking to maximise your wealth, these tax policies provide a rare opportunity to preserve and grow your assets. Lifestyle Excellence: Cities like Dubai and Abu Dhabi offer an exceptional lifestyle, from world-class healthcare and top-tier international schools to luxury living and fine dining. Whether you're interested in high-end real estate or enjoying a cosmopolitan lifestyle, the UAE delivers in every aspect. Stability and Security: In a world where economic and political volatility are increasingly common, the UAE’s robust political stability and thriving economy offer peace of mind. For those seeking a secure environment for both their wealth and family, the UAE stands as a beacon of certainty. The Impact on the Economy As more millionaires relocate to Dubai and other cities, the economic impact is clear: Real Estate Demand: Luxury property prices in Dubai have already seen a 10% rise in 2024, and with more HNWIs moving to the UAE, demand for high-end real estate will continue to grow. This makes the UAE an attractive location for both investment and personal residence. Sector Growth: Industries such as financial services, hospitality, and luxury retail are all expanding rapidly. With more wealth coming into the region, these sectors are being reinforced to meet the needs of the growing affluent population. Wealth Management Expansion: As millionaires settle in the UAE, the demand for sophisticated wealth management solutions is increasing. This provides unique opportunities for financial planners and wealth managers to help you optimise your portfolio in a tax-advantaged environment. The Challenges Ahead The rapid influx of wealth does come with its challenges: Infrastructure Strain: As more millionaires relocate, the pressure on the UAE’s infrastructure intensifies. From transportation to housing, ensuring that the region can accommodate this growing population is a key focus for local authorities. Environmental Impact: As urbanisation accelerates, sustainable growth practices will be critical to minimising the environmental footprint. The UAE is already taking steps to address this, but managing growth responsibly remains an ongoing challenge. Social Equity: With wealth flowing into the region, the potential for inequality exists. It’s essential for policies to address this disparity, ensuring that the economic benefits are shared broadly while maintaining the UAE’s global competitiveness. Conclusion The UAE is well on its way to becoming the world’s foremost destination for wealth in 2025. Whether you’re considering relocating to Dubai, diversifying your investments, or looking for tax-efficient wealth planning solutions, the UAE’s combination of stability, tax advantages, and high-quality lifestyle options makes it an unparalleled choice. For those serious about securing their financial future and enjoying a prosperous life in one of the world’s most dynamic economies, now is the time to act. The UAE’s rise as a wealth magnet underscores its strategic appeal. If you’re considering relocating or investing in the UAE, reach out for expert financial advice.
Why settle for drizzle when Dubai offers tax-free zones, luxury living, and booming business opportunities? Learn why expats are making a comeback.
New Year, New Rues: Learn about UAE corporate tax penalties for late registration in 2025. Avoid fines of up to AED 50,000 with expert advice on compliance and timely registration.
Plan for 2025 with our top 10 financial tips. From the Autumn Budget tax changes to financial planning, ISA contributions & estate planning, optimising your savings & securing your wealth.
The 2024 UK Budget delivered a series of tax increases that could weigh heavily on business owners. With higher corporate tax rates, reduced allowances, and more stringent compliance measures, running a business in the UK is becoming increasingly expensive. For those seeking growth-friendly environments, the UAE offers a compelling alternative, boasting a 9% corporate tax rate, zero personal income tax, and a growing global reputation as a business hub. This shift highlights the need for business owners to assess how tax policies align with their ambitions. In the UAE, businesses benefit from economic incentives, robust infrastructure, and a strategic global position, making it an attractive destination for international entrepreneurs. Key Budget Changes and Their Impact National Insurance Contributions Employers face rising NIC rates (from 13.8% to 15%) and lower thresholds for payments. Despite an increase in the Employment Allowance, the added costs will strain resources for small and medium enterprises (SMEs). The UAE has no income tax or NICs: The absence of income tax or NICs allows companies to reinvest in growth without the burden of rising employment costs. Capital Gains Tax Reform CGT rates have risen to 18% for the basic rate and 24% for the higher rate, impacting disposals after October 2024. Additionally, Business Asset Disposal Relief (BADR) will climb to 14% by 2025. For entrepreneurs selling assets, these changes substantially reduce net returns, limiting funds for reinvestment. The UAE has no CGT: With no CGT, business owners retain more of their profits, fuelling growth and wealth preservation. Changes to Non-Domicile Taxation and Inheritance Rules From April 2025, the non-domicile regime will shift to a residence-based system, narrowing exemptions for offshore income. Additionally, inheritance tax (IHT) reliefs for agricultural and business assets will be capped at £1 million. The UAE does not impose an inheritance tax: Free from inheritance taxes, the UAE offers business owners the freedom to secure their wealth for future generations without complex compliance hurdles. A Strategic Relocation? For UK business owners, the Autumn Budget underscores the urgency of reassessing long-term plans. The UAE, with its favourable tax environment and vibrant business ecosystem, offers a unique opportunity to secure growth and preserve wealth in an increasingly complex fiscal climate. Whether you’re planning to expand or relocate, expert advice is crucial. Our team is here to help you every step of the way. Book a call with one of our advisors below.
The UAE Golden Visa is a long-term residency programme offering 5 or 10-year renewable permits depending on eligibility criteria. Unlike standard residency visas, however, this one allows foreign nationals to live, work, and study without needing an UAE national sponsor. For innovators, investors and skilled professionals looking to take advantage of the UAE's dynamic economy, tax-free income stream and luxurious lifestyle - this visa provides individuals the chance to move in permanently while taking full advantage of all its advantages. Key Features of the Golden Visa Experience Long-Term Residency Take advantage of long-term residency to make life simpler, without the hassle of frequent renewals and build the foundation to advance your career, business or personal life. A five or 10-year renewable visa provides the security needed for growth in all aspects of your life: career advancement, business expansion or personal relationships. Sponsor Freedom Unlike many UAE visas, the Golden Visa gives you more control and independence in managing your residency status in this country. Multiple Entry Privileges Enjoy travel into and out of the UAE freely without incurring entry permits or visa restrictions - making this privilege ideal for business travellers as well as global citizens. Family Sponsorship Make the most of your Golden Visa by including spouse, children and any dependents as beneficiaries so they can live, work and study alongside you in the UAE. Eligibility Criteria of UAE Golden Visa • Individuals across all categories are eligible for these loans, with each grouping having its own eligibility requirements. • Investors investing at least AED 2 Million in an approved UAE business or fund. • Real Estate Investors who own properties worth AED 2 Million can secure a five year renewable visa. • Entrepreneurs: Start-up owners who possess at least AED 500,000 of capital with the approval from an UAE government entity can apply. • Talented Professionals: Individuals skilled in fields like science, medicine, engineering arts & culture who meet specific educational/professional benchmarks. • Outstanding Students: Emirati universities enrolling top performing students Who Should Consider an UAE Golden Visa? • Investors: Individuals seeking a secure and profitable environment to launch or expand business ventures. • Entrepreneurs: Creative thinkers with innovative ideas seeking success in an ever-evolving market. • Talented Professionals: Highly skilled professionals seeking to make an impactful contribution in UAE industries. • Outstanding Students: Top students aspiring towards global educational systems. How Can Mosaic Chambers Help? Navigating the UAE Golden Visa application process may seem complicated and overwhelming, but with Mosaic Chambers will make the process straightforward and worry-free! From eligibility evaluation and paper processing through to helping secure a Golden Visa! For more information, contact one of our advisors.
Our Director, Andy Wood, has written an article for Taxation, offering guidance on handling some of the tougher financial challenges associated with cryptocurrency from a tax perspective. The piece includes analysis of the position for investors affected by the seismic Celsius and FTX bankruptcies. It also explores the risks of owning cryptoassets, such as lost keys, scams, and hacking. To learn more, enter your details below and we will send the article to your inbox. If you have any questions, get in touch here.
The UK’s March 2024 Budget introduced sweeping reforms to the taxation of “non-doms,” with confirmation from the new Labour Government in the Autumn Budget that these changes would proceed in largely the same form.
Are You Thinking of Establishing Residency in the UAE? Mosaic Chambers provides expert guidance across all residency visa options to individuals and families, helping individuals identify the most suitable visa type to meet their goals and qualifications. Whether it is investors, entrepreneurs, employees, retirees, students or freelancers looking for residency visas our comprehensive blog outlines every UAE residency pathway including eligibility criteria and application steps for each.
Mosaic Chambers provides comprehensive guidance on residency routes, helping you make well-informed decisions about relocating to Dubai and the various residency and Visa options.
Firstly, let’s be honest, its great to see HMRC referring to Business Property Relief again. None of that Business Relief nonsense that has crept in over recent years. I would say that is probably the most significant part of the Budget. Of course, you might also be interested in the pretty seismic cuts to: Business Property Relief; and Agricultural Property Relief You are? That’s disappointing. I was hoping to save my poor fingers. Here we go then. Business Property Relief (“BPR”) The Budget announced that both BPR and APR will become subject to a £1m cap from April 2026. Presently, there is no cap on either meaning, that assuming assets qualify for the relief, both lifetime gifts and assets in the death estate can benefit from relief at a rate which is often 100%. In respect of BPR, for example, the shares in an unquoted, family trading business will qualify for BPR at 100% as long as the shares have been held for two years. This means that they can be: transferred into trust without an immediate IHT charge (and often no 10 year charge and no exit charge if the assets are still held at the relevant time); the subject matter of an outright gift and, even it that PET fails, there will be no IHT; and form part of the death estate without there being an IHT charge As I say, the value of relief could be unlimited. However, there is now a cap of £1m. Beyond that, relief is capped at 50%. It should be noted that these changes only apply to the 100% rate. The following business property will qualify for 100% relief: property consisting of a business or interest in a business; unquoted securities of a company which give the transferor control of the company immediately before the transfer; any unquoted shares in a company (see below re changes to AIM shares) If the assets only qualified for the existing 50% rate, for example, a controlling interest in a quoted company, then the new rules do not effect the position – 50% relief applies to the entire value (and does not use up any of the cap). Agricultural Property Relief (“APR”) The same cap will also apply to agricultural land. The following agricultural assets qualify for 100% relief: where there is a right to vacant possession, or vacant possession is obtainable within 12 months (extended, by concession, to 24 months and to circumstances where the tenanted value and vacant possession values are broadly similar). where the property is let on a tenancy beginning after 31 August 1995 (or, in Scotland, a tenancy acquired after that date by right of succession). where the transferor was beneficially entitled to the interest transferred before 10 March 1981 and relief would have been available under the rules then in force. Again, the first £1m of value related to these assets will qualify for the 100% relief with the balance being subject to relief at just 50%. For assets which already only qualify for 50% relief, these are unaffected by the changes. Interaction of BPR and APR under the new £1m Cap The £1m cap applies across both. In other words, you don’t get £1m for BPR and £1m for APR… the spoilsports. Instead, the cap is allocated proportionality over agricultural and business assets. So, in a scenario where Jimmy has the following assets qualifying for BPR / APR reliefs at 100%: £3m of BPR assets; and £2m of APR assets The cap is allocated as £3m/£5m x £1 = £600k to BPR and £2m/£5m x £1m = £400k to APR assets. The balances receive relief at 50%. The £1m Allowance and Trusts A trust will also get a £1m allowance to cover the 10 year charge and also exit charges. It will be applied in the same way, with any assets that qualify for the 100% relief being exempt up to the first £1m with the balance being subject to tax at 50%. Where a person sets up multiple trusts on or after 30 October 2024, we are told that there will be anti-avoidance rules that split the allowance between those trusts. AIM Shares In addition, AIM shares will no longer benefit from 100% relief where held for two years. This is because relief of 50% will now apply to any shares that are listed on non-recognised stock exchanges. The AIM market will be such an exchange (ie not a recognised exchange). This removes an odd feature of the legislation that I have commented on quite a few times in the past. Click here to read. Conclusion These are really big changes which will fetter the ability of business owners and / or farmers to pass on their businesses to the next generation of the family. As such, consideration will need to be given on alternative plans such as outright gifts and life insurance.
It seems odd to group these things together. Employee Ownership Trusts are warm and fluffy. Encouraged by government to increase employee ownership. A cynic might say loved by business owners looking for a tax efficient exit. Whereas Employee Benefit Trusts are the thing of nightmares. They carry more baggage than an average Swissport employee. But they are very much cut from the same cloth. Budget 2024 announced restrictions in the application of both. Let’s take a butchers. Employee Ownership Trusts (“EOTs”) What is an EOT? Employee Ownership Trusts (EOTs) were introduced under the Finance Act 2014 to promote indirect employee ownership by allowing employees to collectively own shares through a trust. In theory, this model incentivises employees by enabling them to benefit from the company’s success, which can enhance employee motivation, retention, and overall company growth. In addition, and of interest to the business owner, EOTs come with specific tax reliefs: capital gains tax (CGT) relief on share disposals, inheritance tax (IHT) relief, and income tax relief on employee bonuses. The CGT relief allows owners to transfer a controlling share (over 50%) of their business into an EOT without triggering CGT, provided the company meets certain conditions, such as being actively trading and equally benefiting all employees. It is not an exemption, but a form of holdover relief. Meaning the trustees essentially pick up the tab for the historic gain when they come to sell. IHT relief is also available for shares transferred into an EOT, making it exempt from charges typically associated with trusts. With the restrictions to BPR announced in the Budget, this might become more attractive for new EOTs going forward. Additionally, employees of EOT-owned companies can receive annual bonuses up to £3,600 tax-free. regulations, professional advice is recommended for companies considering this structure. The changes to EOTs in summary The Chartered Institute of Taxation, for some reason, has had a bee in its bonnet about EOTs for the last few years and it might be said these changes are, at least in part, down to their lobbying. Control: There will be a restriction on former owners (and those connected with them) from retaining control of companies' post-sale to the EOT by virtue of control (direct or indirect) of the Trust. This will be a problem for vendors who want to control from beyond the sale. Trustees must be UK resident: This means that the trustees cannot benefit from a tax-free eventual sale by being non-resident. As such, this ensures that the CGT relief is merely a deferral and not avoidance. The trustees will pick up the tab which will, ultimately, be borne by the employee beneficiaries. Fair market value consideration: the trustees must take reasonable steps to ensure that the consideration paid to acquire the company shares does not exceed market value. I am amazed that trustees are not already doing this. Clawback period extended: the ‘vendor clawback period’ if the Employee Ownership Trust conditions are breached post-sale, will now not end until the fourth tax year following the end of the tax year of disposal Reporting: the claim for CGT relief must include details of the sale proceeds and the number of employees of the company at the time of disposal Income tax distributions: Legislation will clarify that certain payments, including where the company makes payments to the trustees to repay consideration left outstanding to the vendors, is not taxed as a distribution. The changes had immediate effect (e.g. for disposals to the EOT from 30 October 2024 onwards). Employee Benefit Trusts (“EBTs”) Introduction Darkness descends. A wolf howls in the distance. A shiver runs down your spine. Yes, its EBTs folks. However, despite their use for PAYE and corporation tax, EBTs have remained interesting for capital tax planning reasons – whether for IHT purposes of CGT purposes. The shares in a genuine business (note, not necessarily trading) could be transferred to an EBT (without the bells and whistles of the EOT) without it being a transfer of value and without an immediate CGT charge where certain conditions were satisfied. These conditions being less onerous than the EOT. Again, with the curtailing of BPR and BADR, they will remain so in the future. However, one will need to be more and more careful, and the scenarios they will be appropriate have probably reduced somewhat as a result of the Budget. Let’s take a peep… from behind the sofa. The Budget 2024 changes The changes can be summarised as follows: ensure that the restrictions on connected persons benefiting from an Employee Benefit Trust must apply for the lifetime of the trust restrict the Inheritance Tax exemption to where the shares have been held for two years prior to settlement into an Employee Benefit Trust — where there has been a share reorganisation, the shares previously held will be taken into account in considering the two-year holding period ensure that no more than 25% of employees who can receive income payments should be connected to the participator in order for the Employee Benefit Trust to benefit from favourable tax treatment The first of these is unlikely to be a problem – other than for pretty egregious planning which has already been fingered by the GAAR Advisory Panel. You could probably say the same about the second one. The third may have more practical reasons and is likely to mean that EBTs, for these purposes, will have to be used for businesses which have, and are prepared to benefit, a more diverse cohort of employee beneficiaries.
Could we get any sleepier than IHT and pensions. You're forgetting, this is the Rachel Reeves rock and roll budget. Brace yourselves. Current Tax Position on Death Other than in the case of non-discretionary pension schemes, the benefits in a pension scheme escape IHT on death. However, that is not the full picture. Generally speaking, the surplus value in a pension scheme may be subject to income tax in the hands of the recipient, depending on whether the member has reached the age of 75 or not. If the member dies before the age of 75, then the death benefits are usually paid free of tax (though this is a simplified answer). Death benefits paid when the individual dies age 75 or over are taxed at the recipient’s marginal rate of income tax. New Proposals In the Budget, we were told that unused pension funds and death benefits payable from a pension will be added to a person’s estate for Inheritance Tax purposes. This will take effect from 6 April 2027. It will be down to pension scheme administrators to report and pay any IHT due. As such, it seems to be the intention that, where the pensioner is over the age of 75, that the surplus pension fund could be subject to 40% IHT on death. If, say, a child or grandchild receives benefits then the beneficiary will also be subject to tax at a rate of up to 45% on those receipts. This means that the funds could be subject to an overall rate of 67%! Of course, the pension is likely to have benefited from tax relief on contributions going in and tax-free investment growth (generally). But, all the same, seems a bit stingy, Rachel. What about QNUPS? I’ve not seen much about QNUPS in the comments I’ve seen elsewhere. However, it is abundantly clear that the IHT changes will also apply to QNUPS. The Consultation Doc on this aspect states the following: “1.13. While the relevant changes will apply equally to UK registered schemes and QNUPS, any references to pension schemes in this consultation document should be taken as referring to UK registered pension schemes administered by PSAs. We recognise that QNUPS have a different administrative structure to UK registered schemes, and stakeholders are welcome provide any views on how these changes should be implemented for QNUPS (see Question 8 below). “ This is perhaps not a surprise bearing in mind the number of people marketing QNUPS as IHT saving vehicles. But those days appear to be over. That’s a shame. Conclusion Where pensions and QNUPs might have been sold on the basis of their IHT efficiency in the past, this will not be the case from the new rules taking effect in April 2027.
Back in the election manifestoes, Labour had promised to raise more stamp duty by adding another 1% on the rate for non-residents buying UK residential property.
The surcharge for foreigners being 2%.
This seemed perfect. A tax not only paid by ‘others’ (the best kind of tax). But it would be payable by ‘others’ located overseas.
However, it seems that Labour has eschewed such an obvious move and decided to add this to the surcharge applied to anyone purchasing an ‘additional’ property.
It is assumed this is a much more lucrative move.
The Labour Budget brought substantial updates to Capital Gains Tax, focusing on rate adjustments and relief reductions. Business Asset Disposal Relief (BADR) will see phased rate hikes, reaching 18% by April 2026, significantly reducing its benefit. Investors' Relief also faces cuts, with rates increased to 14% and 18% in stages and a reduced lifetime limit of £1 million. Click to read more...
The 2024 Labour Budget brings major changes to the QROPS (Qualifying Recognised Overseas Pension Scheme) landscape, affecting UK pension transfers overseas. The Overseas Transfer Charge (OTC) will now apply to all transfers outside the UK, including those to the EEA. EEA pension schemes must align with global regulatory standards, and UK-registered pension scheme administrators will need UK residency by 2026. These adjustments reflect post-Brexit shifts in tax relief and regulation, impacting QROPS providers and UK residents with overseas pensions.
Labour's latest budget introduces substantial reforms targeting UK non-domiciled (non-dom) residents, reshaping the tax landscape starting in April 2025. For expats, non-doms, and high-net-worth individuals with global assets, these changes will bring both new tax obligations and potential opportunities.
AE Coin: UAE’s first regulated stablecoin approved by the Central Bank under the Payment Token Services Regulation. Backed by the UAE Dirham, AE Coin offers secure, fast, and cost-effective digital transactions for businesses and individuals, aligning with the UAE’s Digital Government Strategy 2025. Discover how AE Coin is set to revolutionize payments and foster innovation in the UAE’s digital economy.
Dubai's 2024 landmark court ruling marks a significant shift in recognising cryptocurrency payments under employment contracts, setting a new legal precedent in the UAE. Discover how this progressive decision is reshaping the legal landscape, potentially paving the way for broader adoption of digital currencies across various sectors and signaling the future of wages in crypto.
Explore the world of tax nomads and discover how to legally minimise your tax liabilities while living and working globally. Our expert insights and strategies help you navigate international tax laws, establish a tax-friendly home base, and enjoy the freedom of a nomadic lifestyle. Stay informed with our latest guides and tips on becoming a successful.
Is it really time up for QNUPS? Last week I saw an article suggesting that QNUPs are being sold as tax avoidance vehicles. This is a surprise as, firstly, I don’t come across many people talking about QNUPS at all. But then, I am just me, and perhaps they’re doing it secretly behind my back, Secondly, unless one can demonstrate that it is set up for genuine pension provision, then any ‘favourable’ tax analysis fails like a pack of cards. Finally, a QNUPS is not a free for all. It must broadly mirror the same rules regarding the drawing of benefits (and the taxation of those benefits) as those for registered pension schemes. As such, like any other pension arrangement, at some point one must take benefits and the majority, like a registered scheme, must be taken as income. Assuming you are Uk resident at the time, then this is taxable when received. This means that, at best, one is probably only deferring tax. At worst, one might be embarking on the worst course of action possible from a tax point of view. As such, the devil is not so much in the detail, but in the exit plan… The legislation First things first, a Qualifying Non-UK Pension Scheme (QNUPS) is not really a specific product. It is merely a tax status. This particular status comes, in the first instance, from Inheritance Tax (“IHT”) code. That said, the statutory provision acts as little more than a signpost to key statutory instruments. It is this secondary legislation that adds meat to the statutory bones. But what is a QNUPS? In short, a QNUPS is a type of international pension scheme. However, it is an international pension scheme that doffs its cap to the UK pension system enough for HMRC to ‘recognise’ it. Note, this is not the same as a pension scheme being registered. However, the scheme and jurisdiction in which it is based must satisfy a number of requirements. Those are outside of the scope of this article - but means that the scheme must broadly be run on the same basis as a UK scheme in terms of the form and timing of benefits. What a QNUPS is not For the acronym-ically challenged, a QNUPS is not a QROPS! The detailed differences between these two types of scheme are beyond the scope of this article (again!). A QROPS scheme will be almost identical to a QNUPS. However, those operating the QROPS will also have agreed to certain reporting obligations with HMRC. As a result, a QROPS is a vehicle which can potentially receive the contents of a tax relieved UK registered pension pot without a tax charge (subject to the relatively new Overseas Transfer Charge). A QNUPS that does not satisfy the QROPS conditions cannot. So, QNUPS usually only take fresh new contributions of cash or assets and not transfers from existing schemes. Contributions to a QNUPS It is worth pausing to mention that, for the purposes of this article, I will reflect on the tax implications of an individual making contributions to a QNUPS and not those made by an employer. Firstly, there is unlikely to be any income tax relief available on a contribution to the scheme. However, the corollary of this is that the contribution is outside of an individual’s Annual Allowance. As such, a QNUPS is sometimes a useful ‘top hat’ pension scheme. In other words, where the maximum tax relief has been mopped up for a particular year, additional contributions could be made to a QNUPS without penalty (but no relief either). Further, in my experience, entrepreneurial clients might consider the loss of (these days much reduced) tax relief on contributions to a registered pension scheme a price worth paying so that they have access to a greater range of investments under a QNUPS. For example, a QNUPs, if the trustees agree, can invest in UK residential property without suffering a penal tax charge. Assuming that any contribution is in cash, then there should not be any capital gains tax (“CGT”) or Stamp Duty Land Tax (“SDLT”) implications. One needs to take more care where one is contemplating the contribution of an asset to the QNUPS. This might, for instance, trigger a taxable gain or, for UK real estate, an SDLT liability. On the basis that the contribution is being made to secure genuine retirement benefits, there should not be any IHT consequences of the contribution. However, where it cannot be justified (say, by an actuary or similar) then the IHT position is likely to be a whole lot more precarious. Most providers, in my experience, will require such an exercise to be undertaken before setting one up. Ongoing tax position CGT The QNUPS, as an Overseas Pension Scheme, will have a statutory exemption from CGT in much the same manner as a UK registered pension scheme. This means, like a registered pension scheme, a QNUPS is outside of the Non-Resident CGT rules which will apply to almost all other vehicles that are making investments in UK real estate. Income tax Generally speaking, any UK source income directly received by the trustees will be subject to UK tax. Where this is a trust-based arrangement then the Rate Applicable to Trusts (“RAT”) would result in any income being taxed at the highest rates. Non-UK income should be outside the scope of UK income tax subject to dealing with complex (personal tax) anti-avoidance rules in this area. Again, if it can be demonstrated that the QNUPs is established to provide genuine retirement benefits then these might be managed. But such an ‘exemption’ would need to be claimed so this needs to be dealt with properly at the outset. IHT As mentioned above, the actual QNUPS definition is taken from the IHT code. Essentially, any value comprised in a QNUPS will be outside the scope of an individual’s estate. As such, it provides an efficient tax wrapper for IHT purposes. Further, the 10-year charge that applies to most trust arrangements does not apply to a QNUPS. But, again, this isn’t really any different to a registered pension scheme. Exit One observation I have made over the years is the need for there to be a clear plan on taking benefits from the scheme and / or what might happen to the funds following the death of the member. In relation to the first of these ‘exit’ issues, it is likely that when benefits are paid then, where the member is UK resident, those benefits will be subject to income tax. For someone who sets up a QNUPS close to taking benefits then they might have committed the cardinal tax sin of turning capital in to income. A reverse alchemy. Where the member is non-UK resident, then it is likely they can draw benefits free of UK income tax. However, they need to make sure of their position in their country of residence to ensure they haven’t jumped out of the frying pan in to the fire! It should be noted that a capital sum could be taken from the scheme as a tax-free cash which would form part of the usual 25% limit. Finally, any ‘exit’ plan should also remain fluid. There are few guarantees in tax other than the fact that the law will most likely be different in a few decades time. Conclusion A QNUPS is not a magic tax bucket and is not a silver bullet to solve all a client’s needs. Used properly, they are not a tax avoidance vehicle. Used as a tax avoidance vehicle, rather than a genuine pension, then one might find the tax analysis comes crashing down around your ears.
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