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The unintended consequences of the Nom-Dom changes – a fall in Foreign Direct Investment (FDI)?

Regular employees working in UK on international assignments hit in crossfire

Proposed changes to the UK Non-Dom rules will hit regular employees working in the UK on international assignments and also their employers – not just wealthy individuals.

Mark Abbs,  Partner said,

All of the focus has been on wealthy individuals but changes to the rules will also hit regular employees working in the UK on international assignments and probably also their employers and hence the wider UK public.

Whilst the new rules will provide some welcome simplifications for those expat employees who only spend up to 4 years in the UK (e.g. with regard to the setting up and managing their bank accounts), the new rules as currently proposed will cause a number of difficulties for those assignees who are still in the UK after 4 years.

Expats will likely want to leave the UK within 4 years of their arrival to avoid these extra difficulties and costs; and those that do stay a little longer will probably try to seek compensation or resolution from their employer. This knock-on effect will negatively impact employers which will in turn impact their appetite or ability to invest in the UK.

Mark said:

Despite this, it is actually questionable how much additional tax HMRC will receive from these individuals because of the way international tax treaties work (the home country often reserves the right to tax income in its own jurisdiction so the UK will not gain much/anything after it has to give credits for foreign taxes etc) ; and expat employees are not usually the highly-paid individuals this policy is designed to hit – they are often regular earners and seem to have been unfortunately caught up in the cross-fire.

“Europe is a highly competitive market for overseas investment and talent. The rub is that the UK is competing with these countries to attract FDI etc. Many other countries have much more beneficial regimes for expat employees including France, Italy, Ireland, Netherlands, and Spain etc. As such, the loss of the UK Non-Dom regime for this group of employees is unlikely to raise much for UK Treasury but is likely to seriously undermine the UK’s efforts to continue being a key European hub for FDI, which will undermine the overall strength of the UK economy and the UK jobs market.

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If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Mark Abbs using the form below.

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