A high-end Porsche 911 Carrera GTS parked outside the Chanel store on Bond Street on October 16, 2023 in London, England.
Mike Kemp In Picture | Getty Images
LONDON – Britain’s super-rich non-dom are calling on the government to introduce an Italian-style flat tax regime to stem the exodus of wealth, as their preferential status comes under threat in the upcoming budget.
Foreign Investors for Britain, a lobby group made up of non-doms and their advisers, together with think tank Oxford Economics have proposed a tiered tax regime (TTR) which would charge an annual fee to wealthy foreigners in exchange for an exemption from inheritance tax (IHT). . on non-UK assets and UK tax on overseas income and gains for up to 15 years.
The fee will be levied according to an individual’s net worth, with the proposed annual fee starting at £200,000 ($260,447) for those worth up to £100 million, and an annual fee of £2 million for those worth more than £500 million.
In contrast to the Italian regime, which charges double the rate of 200,000 euros per year, regardless of the wealth bracket.
Foreign investors for Britain will meet with government officials on Thursday to discuss the proposal.
“If there is no stability, people are now making plans to leave,” Leslie MacLeod Miller, chief executive of Foreign Investors for Britain, told CNBC on Wednesday at an event to announce the proposal.
Those with the broadest shoulders often have the longest legs.
Leslie MacLeod Miller
chief executive of Foreign Investors for Britain
British non-dom status is a colonial-era tax rule, which allows people living in the UK but domiciled elsewhere to avoid paying tax on income and capital gains from abroad for up to 15 years. By 2023, an estimated 74,000 people will enjoy the status, up from 68,900 the previous year.
While the regime has long been politically controversial, it has come under pressure in recent months, after the Labor Party in August announced plans to boost the planned abolition of non-dom status by also banning the use of trusts to protect offshore assets from IHT. .
It comes as Finance Minister Rachel Reeves is expected to announce bumper tax increases in the October 30 budget as she seeks to close a £40 billion funding gap in the public finances. The Treasury did not immediately respond to CNBC’s request for comment on the shortfall or on the upcoming talks with the FIFB.
Non-doms move money
Reeves previously said scrapping the program could save the Treasury £2.6 billion ($3.38 billion) over the next government.
However, Oxford Economics research last month warned that the plan could cost taxpayers £1 billion by 2029/30 in direct revenue. In total, the 72 non-doms surveyed are estimated to have invested almost £8.5 billion in the economy since arriving in the UK.
“This is only a fraction of the money invested by non-doms, so this investment is at risk,” Alex Stewart, associate director at Oxford Economics, said Wednesday.
Indeed, some have begun to make pre-emptive moves.
A new study released on Wednesday by an economic think tank showed that non-doms who took part in the survey had spent at least £842.2 million in anticipation of the change.
Some non-doms who attended the event, but who asked to remain anonymous, said they were considering moving to jurisdictions such as Italy, Switzerland and Dubai if the row plan was more difficult to adopt.
According to Wednesday’s research, which surveyed 115 non-doms and 42 councillors, around 1 in 10 (13%) would still go ahead with plans to leave if TTR was introduced, compared to 98% who said they would leave if the proposed flats. – tax regime is not introduced.
We need to understand that we need people to invest here, to create the jobs, the wealth, the prosperity that we want.
Sadiq Khan
Mayor of London
“The people with the broadest shoulders often have the longest legs, so you should know that,” says MacLeod Miller.
Dominic Lawrance, partner at Charles Russell Speechlys, said the plans are an “improvement” in the Italian system that will be measured according to wealth brackets, thus generating additional tax revenue. Lawrance, who helped draft the proposal, added that it should be done in parallel with existing measures to eliminate non-domicile status to “avoid the perception of a U-turn.”
Oxford Economics said it is currently working to determine an estimate for how much revenue can be generated from the TTR proposals.
Labor Court creates wealth
The Labor Government has said it is determined to tackle unfairness in the tax system, pledging in its election manifesto to close the non-dom tax loophole. However, since then it appears to have softened his stance, with Reeves reportedly reconsidering some elements of his non-dom crackdown.
Prime Minister Keir Starmer on Monday sought to promote the UK as a hub for growth and wealth creation, as he gathered a group of 300 business leaders at Labour’s International Investment Summit.
The mayor of London, Sadiq Khan, told CNBC on Monday that the government must walk a fine line in avoiding wealth creators while making sure they “follow the rules.”
A terraced house in Westbourne Gardens in the exclusive Bayswater area near Royal Oak on January 13, 2023 in London, England.
Mike Kemp In Picture | Getty Images
“We need to make sure we understand that we need wealth creators in London and in our country. We need to understand that we need people to invest here, to create the jobs, the wealth, the prosperity that we want,” Khan said.
“The main mission of this government is growth and we cannot achieve growth without investment from the people you work with. I hope people can believe in what the prime minister said,” he added.
The Lord Mayor of the City of London Corporation, Michael Mainelli, admitted on Monday that there were “problems” with the non-dom rule but noted that the UK must continue to have a “competitive tax regime.”
