In this “stop press” edition of our Globally Speaking e-bulletin, we provide our thoughts on how the announcement this week of the date for the next general election on 4 July 2024 will impact on the government’s proposals to reform the UK’s non-domiciled (“non-dom“) regime with effect from 6 April 2025. You can read more about the Spring Budget measures regarding non-dom taxation on our non-dom hub here.
It was understood that draft legislation to implement the non-dom changes, along with a consultation on the inheritance tax (“IHT“) aspects, was due to be published over the next few weeks; this will no longer be happening, as we enter the period of pre-election sensitivity. The legislation will now be shaped by whichever party wins a sufficient majority on 4 July.
If that party is Labour (as looks likely from current polls), we were given some insight into their potential non-dom policy by a press release published in April. In essence, a Labour government would seek to raise additional revenue by making the proposed transitional rules less generous, specifically by removing the relief for 50% of a non-dom’s foreign source income arising in 2025/26. Additionally, they would bring all “excluded property trusts” with UK resident settlors within the scope of IHT, regardless of when such trusts were created: whether before or after 5 April 2025. This leaves non-doms wishing to mitigate future IHT on their offshore assets through the use of such trusts in somewhat of a quandary as the loss of excluded property status from 6 April 2025 would carry with it the risk of double jeopardy through IHT charges arising within the trust and in the settlor’s estate where the settlor is able to benefit from the structure. You can read partner Camilla Wallace’s reaction to these proposals here. Labour’s election manifesto is expected to include further details.
Over the last few weeks, interested stakeholders had been given the opportunity to voice concerns with HM Revenue & Customs (“HMRC“) on the government’s non-dom proposals through a series of “listening sessions”. Wedlake Bell attended several of these. The remaining listening sessions have now been suspended. Whilst the views put forward in this forum will not now have an immediate impact (it was hoped that some of them might help inform impact assessments and ultimately the draft legislation), HMRC have received a wealth of information and substantive feedback from the industry which will be available to Labour now, as it embarks on costing its manifesto pledges, and should they come into power.
So, what do affected non-dom clients do now? Since we only have a six-week wait until polling day, the general advice would be that although we know enough for clients to start formulating sensible plans of action in conjunction with their advisers now, the implementation of such planning may be best deferred until after 4 July. Once we know what the political makeup of the new government will be, we will have a better idea of how such planning options might be affected, and how prominently relocation planning may feature on that list.
We will issue a more detailed update once the parties’ manifestos have been published. Please do not hesitate to contact us in the meantime if you wish to discuss how the 4 July election may shape decision-making for you or your clients.