Can we attract the wealthy back to Britain?

Let’s be clear, no one is suggesting a return to the non-dom rules; that boat has well and truly sailed. However, with concern that UK PLC may take a financial hit from a trade war, the government could take steps to fill the Treasury’s coffers at no cost to the UK electorate.

It is an obvious thing to say, but if you are wealthy, you will be receiving lots of income and generating lots of capital gains. It is also true that wealth often means that you are geographically mobile. We also shouldn’t be shy about saying the UK is a great place to live – whether you choose London for its restaurants and theatres or the Scotland Highlands for country living. 

However, unless you are British or Irish, you usually need a visa to come and live here. For the last three years, there has been no visa which is available to the seriously rich. The government could easily create new visas for wealthy people and link them to certain tax benefits. They could, for example, be available to anyone who does not have a British passport and has not been UK resident in the last five years. In order to overcome a common objection, any new visas could prevent free access to the NHS and eligibility for social security benefits.

My experience is that as a general observation, wealthy people are typically happy to pay taxes on income and capital gains. But they often draw the line on estate and wealth taxes which in the UK context, means inheritance tax (IHT). Thus, if a new visa program to attract wealthy individuals is designed, it should have these aspects in mind. There are various ways tax revenue could be raised. 

President Trump has introduced a new US Golden Visa. In exchange for $5m, you can live in the US and only pay tax on US income and gains. The UK could mimic this with our own Royal Visa; requiring an investment of say £5m, which allows someone to be resident here for a 10-year period. This could be combined with an annual tax of £200k per adult irrespective of actual income and gains, and lifetime exemption from UK IHT on foreign wealth. It would make sense for any annual tax charge to be index-linked. At the end of the 10-year period, the Royal Visa could be extended, and perhaps subject to a higher annual tax charge for example, £300k. 

Alternatively, a high value investor visa could start at an investment of £10m, with the benefit of no tax on foreign income or gains and an exemption from UK IHT on foreign assets.

How about a retirement visa to attract wealthy retirees? Along with NHS and social security restrictions, a retirement visa could prevent the retiree from working in the UK. In exchange, the retiree would have to invest say £2m and pay, for example, 10% tax on pension income but with all other foreign income and gains exempt along with a lifetime exemption from UK IHT on all wealth, ie both UK and foreign wealth.

Of all the measures proposed, the IHT exemptions are likely to be the most controversial. The government could go further and faster in this regard too and simply abolish IHT, replacing it with a deemed disposal of assets on death. This would mean capital gains tax is paid on the increase in value of the deceased’s assets, which could widen the number of people who are liable and at a stroke, seek to remove the emotive objections to a death tax on wealth.