One numerically small but economically significant group of individual taxpayers, namely UK resident foreign domiciliaries, will no doubt be paying close attention to the Chancellor’s Spring Statement.
These taxpayers have been in the spotlight, again, in recent months. There has been renewed pressure from the Labour Party for the beneficial tax regime that non-doms qualify for to be abolished (although Labour seemingly accept the need for some kind of short-term special regime for “incomers” to the UK, perhaps applying for a period of five tax years from “arrival”). The Conservative Government has been feeling the heat on this issue, not least because of the much-discussed tax status of a certain close family member of a certain senior Tory MP. The Treasury has reportedly been looking into the cost/benefit ratio of the non-dom tax regime, in the context of claims by the shadow chancellor Rachel Reeves that scrapping the regime would raise additional tax of £3.2 billion per annum.
Common sense suggests that while scrapping the regime might provide a short-term boost to tax revenues, the long-term impact on the country’s finances might be very negative, as some existing UK resident foreign domiciliaries would leave the country and (perhaps even more seriously) foreign domiciled individuals who in future would otherwise have moved to the UK would instead move to other countries with more attractive regimes. Taking this into account, there may therefore be a strong economic case for the retention of the regime, although perhaps with a shortening of the period in which the remittance basis is available from fifteen tax years to ten (which would be consistent with somewhat similar regimes elsewhere, e.g. Italy).
Individuals potentially affected by the outcome of this debate will be watching for developments with keen interest.
Changes could include reducing the time period over which high net worth individuals can avoid tax on their worldwide income. Experts suggest that cutting the duration from 15 to five years could raise an additional £1.6bn a year.