Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Rachel Reeves is set to make a change to the UK government’s crackdown on non-domiciled residents in an attempt to allay concerns over tax reforms announced in October’s budget.
The chancellor told a side event at the World Economic Forum in Davos on Thursday that the government would soon present an amendment to its own finance bill.
This will provide easier access to the Temporary Repatriation Scheme, which allows non-residents to import foreign income and gains made before April 2025 into the UK and pay tax at a reduced rate of 12% for taxes 2025-26 and 2026-27. years, increasing to 15 percent in 2027-2028 – compared to the maximum income tax rate of 45 percent.
The change planned by the government would allow certain funds to more easily access the establishment’s flat tax rates. But while this measure may be helpful for some non-dominants, it is unlikely to make a difference for many.
Reeves said at the Wall Street Journal event in Davos on Thursday that the government had “listened to concerns raised by the non-dom community”, responding to a question about the increase in the net number of millionaires leaving the UK in recent years. recent months. .
Jonathan Reynolds, the business secretary, later confirmed the planned change, first reported by The Times., telling reporters in the Swiss mountain resort: “There is a change to the finance bill. . . when you change a tax system, people will want to know, and there will be some uncertainty, so we need to get that message out.
Reeves announced in the Budget that she was abolishing the non-dom regime, which allows UK tax residents whose permanent home or “domicile” is overseas to avoid paying UK tax on their income or more. foreign securities for 15 years.
He will be replaced from April 6, 2025 by a four-year term. residence regime offering “internationally competitive arrangements for people coming to the UK on a temporary basis”.
Downing Street said the change would not result in a drop in tax revenue from replacing the non-dom regime, and the Treasury still hopes to raise £33.8 billion over the next five years through the reforms.
Non-dominants have been most concerned about changes to inheritance tax on existing trusts, with this issue often cited as the key factor pushing them to leave the country.
Rachel de Souza, tax associate at RSM UK, said that while increasing temporary repatriation facilities was “a good move”, it is “woefully insufficient” to stop wealthy non-Domes from leaving the UK.
“The way to stem this exodus would be to maintain the IHT exemption for offshore trusts, but also reverse proposed changes to agricultural and business property relief which affect farmers and entrepreneurs. “
Robert Brodrick, partner at law firm Payne Hicks Beach, said: “It’s reassuring to see that they are finally addressing the concerns of the many people affected by this, but I don’t think it will be enough. to stem the tide. . . It’s helpful, but exposure to inheritance tax is the biggest nail in the coffin.”
The chancellor also said on Thursday that she wanted to allay concerns from countries like India that the rule changes would not affect double taxation agreements: “That is not the case: we are not going to change these double taxation agreements.”
A Treasury official said: “We are always interested in ideas to make our tax regime more attractive to talented entrepreneurs and business leaders from around the world to help create jobs and wealth in the UK. United. »