Non-dom reform is a missed opportunity for UK investment
Politics at play led to ‘a real mess’
The politics at play in non-dom reform has resulted in a significant missed opportunity to create a world-class regime to attract the right wealth and investment to the UK.
Nimesh Shah, CEO said:
Jeremy Hunt’s surprising decision to abolish the non-dom regime at the Spring Budget was clearly a tactical political move to take the wind out of Labour’s sails, as the UK faces a General Election later in the year.
The Chancellor took firm aim at one of Labour’s key tax pledges and stole the additional £2.7bn tax revenue to partly pay for his 2% National Insurance cut. However, there should have been a considered consultation. It’s a real mess, and many non-doms are already packing their bags for sunnier shores.
But the Government and HM Treasury have the time to address the severe deficiencies in the proposals to repair the damage. Here are the five areas I would urge the Government to seriously consider before enacting any legislation:
- The new 4-year regime is too short – it should be 10 years, with a flat annual charge after 5 years, which would serve to generate additional tax revenue
- The cliff edge removal of the trust protections is severe, and effectively a form of retrospective taxation. A form of grandfathering is appropriate for any trusts created before Spring Budget Day 2024
- The proposed 10-year tail for inheritance tax is not practical, and the current “3-year rule” works effectively
- The 5th April 2019 capital gains rebasing date is illogical – apparently a homage to Nigel Lawson. Jeremy Hunt should not be designing tax policy to salute a personal hero
- Maintaining the legacy of the remittance basis beyond 5th April 2025 is frustrating, and the repatriation facility should be made permanent but gradually increase the flat rate tax
All of this could end up being largely academic, as there is no guarantee, in a General Election year, that any of this will happen – a new Government may shelve the proposals completely or want to design their own version. And even if it were to happen, there is a huge amount of work to do, and I wouldn’t be surprised if everything gets pushed back to 2026 at the earliest.
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If you have any questions about the above, please get in touch with your usual Blick Rothenberg contact or Nimesh using the form below.