This article was originally published by Wealth Briefing, click here to read the original article.
The UK’s non-dom system is on the way out, and now it turns out that the opposition Labour Party – currently far ahead of the ruling Conservative Party in opinion polls – wants to tighten the screws even further on those who have taken advantage of the regime. Lawyers and advisors say this will encourage more of those affected to quit the country.
Yesterday, Rachel Reeves, shadow finance minister in the UK – and who may be in the actual job in a year’s time if opinion polls are reliable – has announced that a Labour government would go beyond abolishing resident non-domicile status.
In March, the UK finance minister, aka Chancellor of the Exchequer, Jeremy Hunt, said he will scrap the non-dom system and adopt a four-year temporary residency programme instead. Hunt’s move was seen as trying to “steal the clothes” from Labour; it was also billed as simplifying a regime dating back to the late 18th century. As part of the change, Hunt said a person will be eligible for the new programme it if he or she has lived abroad for at least 10 years. The old non-dom system, under which a person pays no tax on worldwide income that stays outside of the UK, would die. (This news service has commented that such a move is a mistake.)
Reeves wants to go a step further than this. She wants to stop non-doms from being able to move their money into an offshore trust to avoid paying inheritance tax before the ban comes into place in April 2025. The Labour politician said she also plans to remove a 50 per cent discount on the amount non-doms must pay in tax in the first year of the new ban, a measure aimed at easing the impact of the change.
Given the political winds blowing, it is likely that such a change could become law. Lawyers, judging from a variety of commentaries, fear that many HNW individuals will leave the UK.
Exodus
Camilla Wallace, senior partner at Wedlake Bell, reckoned that the proposals from Labour’s Reeves would encourage more wealthy people to leave the UK.
“It’s likely we will see a surge in wealthy foreign individuals looking to relocate out of the UK; many are already looking to do so prior to today’s news. There is a plethora of other countries with their arms wide open ready to welcome such individuals. Italy, Dubai, Spain, Portugal, Greece, Switzerland – they are all very keen to attract our wealthy residents and arguably have far simpler and more beneficial regimes, for example in some countries you can pay a flat fee for a fixed period of time during which your foreign income/gains are tax free,” Wallace said.
“If the weather and food are better as well, then the decision for such individuals may not be that difficult – many are already incredibly mobile and have no qualms about relocating to wherever best suits their lifestyle – and assets,” she added.