Non-dom status currently allows those with significant wealth who are long term UK tax residents to be exempt from tax on their worldwide income, gains, and effectively estates, with the exception of UK source income and gains and inheritance tax on UK property. They can in most cases as a result live in the UK tax free subject to the payment of an annual fee ranging from £30,000 to £90,000 a year depending on how many years they have been resident here.
It is wholly unsurprising that these proposals have been advanced given recent press coverage of the issue, in relation to HSBC Switzerland in particular. In principle, at one extreme, the position of so called ‘hereditary non-doms’ is hard to justify. These are individuals who have lived perhaps all their lives in the UK but have inherited non dom status from their father. At the other extreme, similar tax exemptions for temporary residents are given in many European jurisdictions. It is likely that the proposals will accommodate the latter short term reliefs but not the longer term ones and there will be discussion around where that line is drawn.
Such proposals have been made in the past and dropped because of opposition from the City in particular, worried that it would affect London’s position as a financial centre. We would guess that if there is a change in government these proposals would this time reach the statute book. The mood has changed radically over the last few years and it was noticeable that even in the FT comments section on this story, there was little support for the tax break being continued in its current form.
Clearly it would be premature for anyone to consider any detailed or radical actions at this point since the proposals are subject to the outcome of the election. Equally we will not see any real detail until any second Budget subsequent to any change in government (the changes reportedly would not apply until April 2016) and the Labour party are currently speaking of a possible grace period of 2 years for individuals to get their affairs in order.
We will of course be following this story closely, providing regular updates to the website and keeping clients advised throughout.