By Michael Barton, Director, Rotherham Taylor
The UK non-domicile tax regime has been under review and attack by both the outgoing and the incoming Governments. We think the effects will depend partly on the degree of ‘tie’ a particular individual (and their family) has with the UK.
The Government needs to take care, for example, that a talented individual with a wealthy spouse doesn’t decide to avoid the UK and carry out their often very international work from somewhere other than London. For example, the two- and three-year secondments in banking, insurance and general finance from New York or Singapore.
In addition, the effects will depend on the stance of other Governments. Italy, for example, offers residency with all tax paid for annual taxes capped at €100,000. In that case, Italy and those countries offering similar schemes might benefit from individuals and their families choosing to work from there rather than London.
Inevitably the UK will lose the tax paid and the benefits of other spending in shops, hotels, restaurants, and schools by the more internationally mobile. Those more mobile citizens with few ties to the UK will go elsewhere and have already chosen to do so under the outgoing Government’s rule changes. Some of the Middle Eastern countries are already benefitting, as well as our European neighbours.
We know that several of our wealthy existing non-domiciled clients have already left and the Government will need to carefully balance the loss of revenue from taxes and spending with the higher taxes from those who choose to stay.
Potential further changes to the Inheritance Tax (IHT) rules around business asset relief on trading companies as well as bringing non-UK assets into the IHT net for the now UK-domiciled individuals and families mean that the wealthier families are moving their bases to more benign tax regimes.
Whilst these changes affect very few UK residents, the wealthier they are and the less connected to the UK they are, the easier they find it to go elsewhere.
It remains to be seen, as with obfuscation of the costs of Brexit, if our Government is truthful with the UK voters in the future about these issues.