It has been reported Chancellor Rachel Reeves could roll back on plans to introduce inheritance tax (IHT) on the global assets of non-doms after an exodus of wealthy individuals from the ‘punitive’ UK tax regime.
There is ‘mounting evidence’ the policy is driving the wealthy out of the UK. In April non-dom status with abolished and changes to IHT would impose a 40% levy on global assets; a policy which has been described a ‘out of step’ with many other countries.
“The inheritance tax change is perceived by many as the most contentious aspect of the non-dom reforms – complex and globally out of step.
said Anthony Whatling, at wealth management firm Alvarez & Marsal
“If the Government wants to keep wealth – and the business that follows it – in the UK, this is the lever it needs to pull.”
Estimates vary but research has indicated as many as four in ten non-doms are actively considering leaving the UK for more favourable tax regimes. In Italy, for example, wealthy foreigners can pay a specified annual fee, ranging from €100,000 (£85,000) to €200,000 a year to exempt their overseas assets and income from tax charges.
And the Centre for Economics and Business Research (CEBR) has suggested the policy could negate the government’s efforts to raise funds from the tax saying if 25% of non-doms quit the UK, the Treasury would make no extra money from scrapping the tax status. If one third left it would cost the UK £700m in the first year; although the numbers are tempered by a warning from The Office for Budget Responsibility (OBR) which said the forecasts were ‘highly uncertain’ and based on the behaviour of a small and already highly mobile group of people.
A Treasury spokesperson said:
“The UK remains highly attractive. Our main capital gains tax rate is lower than any other G7 European country and our new residence-based regime is simpler and more attractive than the previous one, whilst it also addresses tax system unfairness so every long-term resident pays their taxes here.
“As the Chancellor set out at the Spring Statement, the Government will continue to work with stakeholders to ensure the new regime is internationally competitive and continues to focus on attracting the best talent and investment to the UK.”
