02 October 2022
It has been nearly two weeks since the government’s mini-Budget, and in the chaotic interim period, the UK’s tax policy has come under scrutiny at a potentially unprecedented level.
The outcries from certain factions have caused the chancellor to row back on the announced cut to the additional rate of income tax and the prime minister herself has not ruled out making further changes.
With constantly shifting approaches to tax policy, including the rates of tax themselves, consideration should be given to the impact of these issues on the wealthy and internationally mobile who may be considering relocating to the UK.
The primary subset of this market will be ‘non-doms’ – many of whom are born outside the UK but look to come here for a temporary purpose, such as employment or to set up a business. There is no doubting the contribution that such individuals make to the UK economy – estimated to be nearly £8 billion from the primary direct taxes alone from 68,300 individuals in the year to 5 April 2021.
However, if those contributing that level of tax base to the UK economy, likely to be financially sophisticated individuals themselves, are analysing the attraction of a new jurisdiction to set up shop, there are some issues that are certain to be high on their agenda. Financial and currency stability, a favourable tax regime and access to a high calibre jobs market are likely to be key – none of which have been particularly prevalent trends in the UK over the past 12 months.
Labour’s recent performance in the polls, and promise, should they be voted into power at the next general election, to consult on restricting the advantages of the non-dom tax regime to five years, or abolish it entirely as vowed by the shadow chancellor Rachel Reeves, may be setting a perilous landscape. In the short-term, this will be far from encouraging for such individuals to move to the UK, and we could see an exodus of existing non-doms and their tax revenues with them.
The next general election is looking likely to be in summer or autumn of 2024, which in the context of the above could now mean an extended period of uncertainty. The impact of this could be to drive wealth and investment away from the UK and into other jurisdictions that have established competing non-dom regimes in recent years, such as Portugal or Italy, or to another emerging financial centre such as Dubai.
It is absolutely imperative that the government’s policy of stimulating economic growth and the fall out therefrom, does not inadvertently result in the alienation of the non-dom market. Reassurances designed to quell any rising discontent must be offered up imminently.