Wealthy foreigners express anger and “disappointment” over Prime Minister Jeremy Hunt's decision to scrap colonial-era “non-Dom” regime that allowed them to avoid paying tax on overseas income did.
This system dates back more than 200 years and allows people with a permanent residence or 'domicile' abroad to pay UK tax on their overseas income and profits for up to 15 years, unless they repatriate the income or capital gains. be exempted from Country.
In Wednesday's budget, Mr Hunt announced the abolition of the scheme, reducing the period during which people can benefit from the perks of the position from 15 years to four years.
The decision, which takes effect in April 2025, deprives the opposition Labor Party of one of its flagship fiscal policies, and No-Dams and its advisers are rushing to understand its impact.
“The phones are ringing and our inboxes are full,” said Edward Hayes, a director at law firm Burgess Salmon. Some customers who thought they had arrived were “very disappointed.” [to the UK] In good faith, the rules change mid-game. ”
Particularly hurtful for non-Kingdoms was the government's decision to scrap the common planning method for protecting foreign income and trust interests before they are considered UK resident.
Mark Davis, a non-domestic tax adviser, said some clients were extremely frustrated. “I've been asked by many people to recommend other locations that might be suitable,” he said.
A non-European businessman who has lived in London for more than a decade described Mr Hunt's decision as “completely stupid”.
“Nobody expected this from the Conservative Party,” he said. “We are leaving London and moving to Switzerland.''
“The writing is on the wall. People are going to leave,” he added. “Since Brexit, banks have opened branches across Europe, so relocating from London is less taboo than it was a decade ago. That's Hunt's big miscalculation.”
Non-Dom governments have come under scrutiny as both the Conservative and Labor parties seek to capitalize on voters' concerns about inequality. Eight years ago, then Conservative Chancellor George Osborne tightened the system so that from April 2017, expats who have lived in the UK for at least 15 of the past 20 years will be considered resident in the UK. .
At the same time, other European countries, including France, Italy and Portugal, have launched similar non-state or deportation systems to attract wealthy families, increasing competition from traditional havens such as Monaco and Switzerland. ing.
In 2017, Italy announced a scheme that would exempt foreign income from Italian tax in exchange for an annual payment of 100,000 euros. A former Goldman Sachs executive said many of his former colleagues moved to Milan to take advantage of the regime.
Charles McDowell, a London-based luxury residential property consultant, said the UK government should try to attract non-residents rather than drive them out. “These people are mobile… They want to come to London, but we should make it easier, not harder,” he said.
Spending watchdog the Office for Budget Responsibility estimates that Mr Hunt's policies will generate an additional £2.8bn in tax revenue in 2026-2027, but the impact of the measures on non-Kingdom people's decisions to remain in the UK will be profound. warned that. Attracting new people was “very uncertain.”
The OBR's projections were based on the assumption that between 10 and 20 per cent of non-Dom nationals who would be ineligible for the new regime would leave the UK.
Some say the exodus of non-Kingdoms could have a wider impact, as many non-Kingdoms bring skills, jobs and investment to the UK, generating economic activity and tax revenue for the Treasury. It pointed out. Many of them are philanthropists who donate to British universities and institutions.
But some say the changes aren't enough to drive out most non-Doms. Roary Scarisbrick, a partner at acquisition agent Property Vision, said they would “reduce some of the attractiveness of Britain, but it's not Armageddon”. “It's good to have a tax system, but it's not overwhelmingly attractive.”
A bank executive at a major European financial institution said most non-state businesses would remain in the UK, even if they were upset about the changes. “There will be a lot of noise… but there will be little actual relocation,” the banker predicted.
A veteran London-based hedge fund manager agreed, saying: We have a great school system and culture here in the UK. ”
Marco Serrato, a partner at law firm Maisto e Associati, which operates in Italy and the UK, said the changes would make Italy more attractive and allow for longer-term planning than the new UK system. Ta.
He added that Mr Hunt's proposals were still “quite aggressive” in attracting new arrivals, with the potential for “significant tax benefits” from them.
Other advisers said transition provisions would allow non-Kingdoms to pay just 12% tax on overseas assets realized before April 2025, as long as they repatriate these funds by April 2027. pointed out. High income earners who bring this money into the UK will now be taxed as follows: 45 percent on income and 28 percent on capital gains.
This is potentially attractive to some wealthy people who have amassed millions or even tens of millions of pounds of wealth overseas, and without the huge taxes this would generate, Mr Hayes said he would have liked to have brought it to the UK.
Mr McDowell, a real estate consultant, said: . . But we have to be careful not to push people off a cliff. ”
Additional reporting by Costas Mourselas
