Bank of Mum and Dad loans made by international families to purchase UK property will be hit by inheritance tax.
In a HM Treasury paper published last week, the government widened their plans to reap more tax receipts from non-domiciles to mean loans from parents to buy UK property will now also face inheritance tax bills.
As of April 2017, inheritance tax will be charged on UK residential property held indirectly by a non-dom through an offshore entity such as a company or trust.
Once UK residential property owned indirectly is brought within the scope of inheritance tax, the same rules, exclusions and reliefs will apply as they currently do to all other property.
This approach will also mean that there will be no need for any fundamental revision to the existing inheritance tax rules, which HM Treasury argued might create unnecessary complexity.
Andy Wood, founder and director of Enterprise Tax Centre, said ministers have given insufficient thought to rule changes due to come into force in April next year.
He said: “There are many changes afoot in the tax world – it seems that change is the new norm. The least satisfactory aspect is the uncertainty this continual change has on business people and private individuals inside and outside of the UK.
“At a time when we face the turmoil of Brexit and with other countries actively courting wealthy internationally mobile high net worth individuals, the government should be trying to make the UK more rather than less attractive.
“Half-baked changes to non-dom tax rules is not the way to go about achieving this desired result.”
Richard Le Tocq, head of Locate Guernsey, an organisation that facilitates the relocation of individuals and businesses to Guernsey, said: “The Treasury’s new Finance Bill has confirmed the fears of many in the non-dom community.
“The draft legislation merely represents a continuance of the Government’s drive to make the UK an increasingly difficult jurisdiction for HNWIs.”