A consultation put forward by the Treasury has suggested that thousands of ‘non-dom’ property owners could face large Inheritance Tax (IHT) bills as part of its drive against property ownership by offshore companies. This follows last year’s summer budget which announced plans to change the tax regime for people who have a foreign domicile.
Currently UK born individuals are liable to pay IHT on their worldwide property, whereas non-doms are only liable on property that is situated in the UK. However, the Government wants to remove this exemption so that individuals can no longer put property into an offshore company to avoid IHT.
The consultation states that it would want to abolish the practice of “enveloping”, where individuals hold UK residential properties through an overseas company or similar vehicle. It will effectively bring all UK residential property within the scope of IHT, irrespective of how the property is owned (for example through a company).