Speculation is mounting that UK Chancellor of the Exchequer Rachel Reeves is preparing to row back on some of her plans to tax wealthy foreigners who live in Britain but claim their residence or domicile is overseas.
The Labour government had hoped that by toughening up on rules brought forward by the Conservative former chancellor Jeremy Hunt that an extra £1 billion could be gleaned from a tax raid on the so-called non-doms.
However, according to media reports, Treasury officials have warned that Ms Reeves's plan could backfire dramatically if implemented, because of the number of super-rich people who would leave Britain in the wake of the rules being enforced. The implication is that they would take their investment and spending money with them.
As such, tax experts like Anthony Whatling, managing director at Alvarez and Marsal, think the current uncertainty around the rules is already "causing some to reconsider their position in the UK".
"Watering down the proposals might be a sensible move to prevent a further outflow of wealthy individuals, which could ultimately reduce the expected tax revenue," he told The National.
News of the rethink has been welcomed by Foreign Investors for Britain, a private wealth lobby group. “There are alarm bells ringing at the moment,” Leslie MacLeod-Miller, the group's chief executive told The National. “People are already leaving. If you remember, the Chancellor criticised the previous government for not understanding the way the world is. And so, the Labour government needs to understand this is the way the world is.”
Mr MacLeod-Miller said he hopes the government will listen to research from Oxford Economics, which has cited certain “red lines” for the non-dom population, including the plan to submit global assets to inheritance tax.
“What we have proposed is a tiered tax regime, which will see those with the broadest shoulders pay more. It’s a fairer system and it means that the ordinary person is also benefitting, because those tax revenues will go to pay for the hospitals, the NHS and so many social welfare programmes non-doms already contribute to,” said Mr MacLeod-Miller.
One government official told The Financial Times that they would be “pragmatic, not ideological”, but would not abandon their plans entirely. A Treasury spokesperson called the FT's report “speculation, not government policy”, but said the “outdated non-dom tax regime” would be removed. In recent weeks, financial advisers say they have received thousands of enquiries from wealthy non-doms relating to Ms Reeves's tax plans.
Originally, Mr Hunt planned to raise £2.7 billion by scrapping the non-dom tax status, with the measure due to take effect from April next year. But his plans also meant non-doms would not have to pay UK inheritance tax on foreign gains and income that was held in trusts. Plus, the Conservatives planned a 50 per cent tax discount on foreign income for non-doms until 2026. However, the new Labour government calculated that those concessions were worth an extra £1 billion to the Treasury in the first year and was planning to scrap them.
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Stemming finance flows
Earlier this week, a report in the Guardian newspaper suggested Treasury officials are concerned estimates due to be released by the Office for Budget Responsibility will show that Labour's tax plans on non-doms will not raise the projected sums for the simple and real possibility that the super-rich will leave the UK.
When asked about the The Guardian's report, former Bank of England chief economist Andy Haldane told the London radio station LBC: “This is a time where we need more of that private finance to fuel growth and recovery. If it were me, I’d be being a bit careful in not deterring just the flow of finance we need to get growth going.”
Non-doms have been a target for Labour both before and since the general election in July. In August, Prime Minister Keir Starmer pledged that the new Labour government would be “cracking down on non-doms” and that its budget announcement at the end of October would be “painful”. According to official figures, there are around 74,000 non-doms in the UK who in 2023 collectively paid £8.9 billion in UK income tax, National Insurance contributions and capital gains tax.
"Given the current uncertainty and potential impact of the proposed changes, it’s crucial for those affected to take proactive steps now," Mr Whatling said. "Preparing a contingency plan will ensure that any action taken is strategic and not reactive when definitive rules are finally laid out. Provided that we get full details of the new rules when the Chancellor speaks on October 30, there should be sufficient time for non-doms to make sure they can take appropriate steps before the new rules come into force"
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2). Roberto Soldado - Valencia - £25m: Flop
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4). Son Heung-min - Bayer Leverkusen - £25m: Success
5). Darren Bent - Charlton Athletic - £21m: Flop
6). Vincent Janssen - AZ Alkmaar - £18m: Flop
7). David Bentley - Blackburn Rovers - £18m: Flop
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Bangla Tigers v Deccan Gladiators (3.30pm)
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Essentials
The flights
Whether you trek after mountain gorillas in Rwanda, Uganda or the Congo, the most convenient international airport is in Rwanda’s capital city, Kigali. There are direct flights from Dubai a couple of days a week with RwandAir. Otherwise, an indirect route is available via Nairobi with Kenya Airways. Flydubai flies to Kinshasa in the Democratic Republic of Congo, via Entebbe in Uganda. Expect to pay from US$350 (Dh1,286) return, including taxes.
The tours
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In the Democratic Republic of Congo, local operator Kivu Travel can organise pretty much any kind of safari throughout the Virunga National Park and elsewhere in eastern Congo.
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