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Rachel Reeves is set to make a difference to the UK government’s crackdown on non-residents in a bid to ease concerns about the tax reforms announced in October’s budget.
The chancellor told an extraordinary event at the World Economic Forum in Davos on Thursday that the government would soon table an amendment to its finance bill.
This will enable easier access to the temporary repatriation facility, which allows non-residents to bring foreign income and gains made before April 2025 into the UK and pay tax at a reduced rate of 12 per cent 2025-26 and 2026-27 years, rising to 15 per cent in 2027-28 – compared to the maximum income tax rate of 45 percent.
The change planned by the government would make it easier for certain funds to access the facility’s flat tax rates. But while the move may be helpful for some non-domes, it’s unlikely to move the dial for many.
Reeves said at The Wall Street Journal event in Davos on Thursday that the government had “heard the concerns that have been raised by the non-significant community”, responding to a question about a rise in the net number of millionaires leaving the UK recently. month.
Business Secretary Jonathan Reynolds later confirmed the planned change, first reported by The Times, telling reporters in the Swiss mountain resort: “There is a change in the finance bill . . . when you’re changing a tax regime, people are going to want to know and there’s going to be some uncertainty, so we need to get that message out.”
Reeves announced in the Budget that she was scrapping the non-domestic regime, which allows UK tax residents whose permanent home or “domicile” is overseas to avoid paying UK tax on their income foreign or capital gains for 15 years.
It will be replaced from 6 April 2025 by a four-year residence-based scheme to provide “competitive international arrangements for people coming to the UK on a temporary basis”.
Downing Street said the change would not lead to a fall in tax from replacing the non-discretionary regime and the Treasury still expects to raise £33.8 billion over the next five years from the reforms.
Non-settlers have been most concerned about changes to inheritance tax on existing trusts, with the issue often cited as the main factor driving them to leave the country.
Rachel de Souza, tax partner at RSM UK, said that while an increase in the temporary repatriation facility was “a good move”, it was “woefully insufficient” to prevent the non-domestic wealthy leaving the UK.
“The way to stem this exodus would be to retain the IHT exemption for offshore trusts, but also scrap the proposed changes to agricultural and business property relief that affect farmers and entrepreneurs.”
Robert Brodrick, a partner at law firm Payne Hicks Beach, said: “It’s reassuring to see that they are finally responding to the concerns of the many people who have been affected by this, but I don’t think it will be enough. to stem the tide. . . It’s useful, 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 including India that the rule changes would not affect double taxation agreements: “That is not the case: we are not going to change those double taxation conventions.”
A Treasury official said: “We are always interested in hearing 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. “
