Experts Support Reeves’ Non-Dom Changes
Experts in the field of taxation and academia have come out in support of Rachel Reeves’ proposed changes to the non-dom status in the UK. These experts believe that the adjustments being considered are sensible and pragmatic, taking into account the potential impact on the economy and tax revenue.
Concerns Over Potential Tax Loss
There is a concern that tightening up on the proposed changes to the non-dom regime could lead to wealthy foreigners leaving the country, resulting in a decrease in tax revenue. The current non-dom status allows individuals living in the UK who are not permanently settled to avoid paying tax on their overseas income.
Former Chancellor Jeremy Hunt had announced plans to abolish the non-dom tax status, but Reeves is now considering a more measured approach. Labour had initially promised to scrap concessions in their manifesto, but discussions are ongoing between the Treasury and the Office for Budget Responsibility about the best course of action.
Support for Gradual Changes
Arun Advani, director of the Centre for the Analysis of Taxation and an associate professor of economics at the University of Warwick, believes that the proposed changes should be implemented gradually. He suggests easing the current cliff-edge in the proposals, which would see non-doms paying inheritance tax in full after 10 years in the UK, by introducing a gradual increase in the tax rate.
Advani also recommends the inclusion of an “unwinding provision” for those who have put money in offshore trusts after George Osborne’s reforms exempted them in 2015. This provision would allow individuals to walk back out of the offshore trusts without facing a hefty tax charge, making the overall reform fairer and more balanced.
Clarification Needed
Tax partner Rachel de Souza at RSM emphasizes the importance of clarifying the intentions behind the proposed changes to avoid any unintended consequences. She calls on Reeves and Treasury officials to provide more details before the Budget on 30 October to prevent wealthy non-doms from leaving the UK.
De Souza also highlights the lack of incentives for non-doms to remain in the UK under Labour’s current manifesto plans and suggests making concessions to retain this demographic. She specifically mentions the potential revision of bringing offshore trusts into the inheritance tax net as a positive step towards fairness in the tax system.
Impact on Wealthy Residents
The non-dom tax loophole gained attention when it was revealed that Akshata Murty, wife of Rishi Sunak, had used it to potentially save millions of pounds. Murty, whose family business is valued at around £60 billion, decided to forgo claiming the non-dom status on her worldwide earnings to avoid any distractions for her husband or family.
With the proposed changes to the non-dom regime, there is a concern that some wealthy individuals have already left the country, and it may be challenging to entice them back. The government is also considering implementing a “tap tax” for those with large gardens or swimming pools to generate additional revenue for public services.
In conclusion, the proposed changes to the non-dom status in the UK have received support from experts in the field, who believe that a sensible and pragmatic approach is necessary to balance the tax system effectively. It remains to be seen how these adjustments will be implemented and their impact on the economy and tax revenue in the long run.
