The UK’s non-dom tax regime, established over 200 years ago, is under scrutiny as this, and the previous government, have proposed its abolition;It is expected that inheritance tax will be charged on the foreign income, gains, and trusts held by current non-doms, resulting in a likely exodus of those under this regime;If the expected abolition to the status goes ahead in its current form, it would present a number of legally and fiscally frustrating scenarios. These include dead settlor events, confusions around the value of trusts and inheritances, withholding complications, and issues for transient residents (such as students);Changes to inheritance taxes’ scope may also create a ‘tail’ effect, wherein emigres who die within 9 years of leaving the country (even if they have not returned in that period) would be in-scope for the tax. This could put off individuals becoming UK resident in the future;The current non-dom system is confusing and requires urgent, simplifying reforms to increase tax revenues, bolster investment and economic growth, and deliver a more effective legal playing field;In order to solve these problems and indeed, attract non-doms to the country, we recommend:1. Introducing a £150,000 flat-tax for non-doms.2. Considering a Swiss-style forfait system.3. Creating a reduced-tax temporary worker status.4. Offering incentives for non-doms to invest in UK assets.5. Returning to a lower tax economy6. Simplifying the UK tax system to reduce complexity and costs.
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Table of Contents
- The views expressed in this report are those of the authors and do not necessarily reflect any views held by the publisher or copyright owner. They are published as a contribution to public debate. 2
- Copyright Adam Smith Research Trust 2024. Some rights reserved. 2
- Published in the UK by ASI Research Ltd. 23 Great Smith Street London SW1P 3DJ 02072224995 infoadamsmith.org 2
- Executive Summary 3
- Introduction and overview 4
- The Non-Dom regime and the Governments proposed changees 6
- How non-doms are currently taxed 6
- The Governments proposed changes 7
- Case Studies 8
- The non-UK tax resident but UK present individual 8
- The dead settlor trust scenario 9
- The non-UK resident business owner how the changes will still leave UK tax resident owners of UK businesses in a worse tax position than their non-UK tax resident business-owning counterparts. 10
- The position of UK emigres how the 10-year IHT tail may create unfairness and enforceability complications 11
- Transient residents for example those studying at UK universities 12
- Where should we go from here 13
- 1. An Italian Style flat fee system. 13
- 3. Give HMRC power to agree British forfait agreements inspired by the Swiss model. 14
- 4. Correcting the tax incentives 15
- 5. A return to a lower tax economy 16
- 6. Simplified tax rules 16
