Non-domiciled and deemed domiciled beneficiaries

Produced by Tolley

The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Non-domiciled and deemed domiciled beneficiaries
  • Introduction
  • Overview of charging provisions and their application to non-doms
  • Transfer of assets abroad code
  • The remittance basis for non-domiciled beneficiaries
  • Beneficiary is non-domiciled settlor
  • Beneficiary is close family member of non-domiciled settlor
  • Beneficiary is recipient of onward gift
  • Beneficiary is recipient of onward gift and a close family member of the settlor
  • Capital gains tax charges under section 87
  • More...

Non-domiciled and deemed domiciled beneficiaries


The current tax position of non-domiciled and deemed domiciled beneficiaries of non-resident trusts is a complex landscape mapped by successive changes in the law. Before 2008, UK resident but non-domiciled beneficiaries were protected by a cost-free remittance basis option for income tax and, like non-domiciled settlors, they were exempt from attribution of capital gains within the trust. Major changes in 2008, 2017 and 2018 have incrementally brought non-domiciles into the regime under which UK domiciled beneficiaries of non-resident trusts are taxed.

Changes introduced in 2008 scaled down some of the advantages of long-term non-domiciled status. The remittance basis charge was introduced to impose a cost on accessing the benefits of the remittance basis. See the Remittance basis ― overview guidance note in the Personal Tax module. At the same time, changes were made to the taxation of non-domiciled beneficiaries of non-resident trusts to bring their benefits from the trust within the scope of capital gains tax.

Notwithstanding the imposition of a charge for the use of the remittance basis, public and political opinion continued to oppose the non-domiciled advantage. As a result, Finance (No 2) Act 2017 introduced the concept of deemed domicile for income tax and capital gains tax for the first time. Long-term residents of the UK, and those who were originally UK domiciled, can no longer benefit indefinitely from the remittance basis. Once they satisfy the conditions for deemed domicile, they become taxable on their worldwide income and gains.

In conjunction with the introduction of deemed domiciled status, provisions were added to the legislation to provide some protection to non-domiciled settlors who had created non-resident trusts. The changes in 2017 and 2018 had the consequential effect of amending and extending the application of the beneficiary rules. The result is a complex body of law in which the overall structure and purpose is obscured by extensive detail.

This guidance note identifies the special rules that apply to non-domiciled or deemed domiciled beneficiaries

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