Since 2011, non-doms, fiduciaries, trust companies and their advisers have become used to the arrival of regular briefings around the subject of the de-enveloping of UK residential properties, and to the sound of the UK Government’s ratchet gradually increasing the force being applied, rather like a medieval instrument of torture. The end, however, is very much in sight (and it is not a very pretty one), and a date can be put on it: 6 April 2017. Any idea that the Government might not have the same appetite for these changes in the post-Brexit world has been blown away.

For those who decide that they want to take action and de-envelope, time is short (the draft legislation is not expected until December) and more so where third-party consents are required for properties to be transferred prior to the deadline.

The latest consultation paper was published on 19 August 2016. The effect of this document is to clarify what we can expect in a number of key areas. Some of them are particularly complex (particularly in relation to the deeming of domicile) and technical and so not within the scope of a general alert like this. They are, however, significant and will require careful thought and advice.

The issue for offshore trusts is that it is clear that property held through offshore structures will not now be protected from IHT, with no exemptions for main residences or rental businesses. It is likely that IHT planning was the most prevalent reason for enveloping, and so this change will affect how the merits of de-enveloping will now be viewed.

Those wishing to de-envelope post-6 April 2017, in order to remove themselves from the scope of ATED, ATED reporting and ATED-related CGT, will face a number of transactional taxes without being able to obtain any relief for them on future taxable events. So it is essential that those administering such structures review them and ensure that if de-enveloping is likely to be required, that it is planned for and done before the rules change. There are a number of ways in which de-enveloping can be achieved, according to the structure of the envelope and other circumstances, and we would be happy to advise anyone considering taking these steps.

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This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.