There is some good news for newer and prospective non-doms.
While the Figs regime only lasts for four years, the benefits during that period are more generous than under the current system. Not only will individuals be exempt from UK taxation on Figs during this period, but they can also remit those Figs to the UK without incurring UK taxation on them.
For recent arrivals who have been UK resident for fewer than four years as of April 6 2025, they will still be able to claim the Figs regime for any remaining years of the four-year window.
For example, someone who first became UK resident in 2022-23 after 10 years of non-residence, and so will have been resident for three tax years by April 6 2025, would be able to claim the Figs regime for the 2025-26 tax year (but not thereafter).
Additionally, there will be a temporary repatriation facility for individuals who have previously claimed the remittance basis and wish to remit pre-April 6 2025 Figs to the UK.
The previous Conservative government proposed that individuals who had been taxed on the remittance basis could elect to pay tax at a reduced rate of 12 per cent on remittances of pre-April 6 2025 Figs during the tax years 2025-26 and 2026-27.
Labour previously confirmed that a similar facility will be available, though the tax rate and specific timeframe are yet to be finalised.
The ugly part of these changes is that they are still clouded in uncertainty. Many questions remain unanswered, including the following: Will it be feasible to deliver the required legislation in a considered form before the proposed start date of April 6 2025?
Will Figs arising during the first four years of UK residence qualify for treaty double tax relief? How will capital losses be treated after the first four years of UK residence? How will claims for the Figs regime work in practice? Will claimants have to calculate and specify the amount of their Figs?
Will residence be the only connecting factor for IHT purposes? How will the 10-year IHT ‘tail’ work in practice? How can the IHT regime be altered in such a way as to facilitate the taxation of excluded property trusts without causing widespread unintended consequences given the crucial nature of ‘excluded property’ in the IHT code as a whole?
Will it be possible to avoid the new regime by leaving the UK before April 6 2025? How will existing capital taxes treaties be impacted by the proposed reforms? Will the concept of domicile remain a relevant factor for determining trustee tax residence – or, for that matter, the status of an individual for other important non-tax considerations, such as Inheritance Act and matrimonial proceedings?
