The Treasury is reconsidering parts of Labour’s manifesto plans to step up efforts to abolish non-resident tax status.
This comes amid concerns over how much money will be raised if wealthy foreigners leave the UK.
A “non-resident” is a UK resident whose permanent residence or residence is outside the UK for tax purposes.
Although the Office for Budget Responsibility (OBR) has yet to set out specific policies as part of the budget process, Treasury officials admit that scrapping two concessions made by the previous government may not raise the £1 billion they had thought, or even any money at all. . Not at all.
Labor’s manifesto earmarked £1 billion for extra hospital and dental appointments and school breakfast clubs.
The problem is that the concessions made when Jeremy Hunt unexpectedly scrapped the non-settlement scheme were designed to reduce the incentive for wealthy foreigners with permanent homes abroad to immigrate.
It is predicted that around half of the money raised from the wider repeal plan will be lost due to behavioral changes.
The OBR assessed in March that the revenue raised was subject to a high degree of uncertainty.
For example, small changes to immigration assumptions could mean that planned additional tightening could raise little money.
While a final decision has not yet been made, the decision to water down or phase in inheritance tax on trusts is being considered, as is the introduction of a foreign income discount next year.
The Treasury insists that any further changes to the system should indicate raising funds and that overall non-dom status will remain abolished.
Non-DOM refers to a person’s tax status regardless of their nationality, citizenship or residency status – although it may be affected by these factors.
Non-doms are only subject to UK tax on their income earned in the UK. They do not have to pay tax to the UK government on money earned elsewhere in the world (unless they deposit the money into a UK bank account).
For wealthy individuals, this offers substantial and completely legal savings opportunities if they make a low-tax state their home.
One of the most prominent non-locals is Akshata Murty, wife of former chancellor Rishi Sunak.
After her identity details were revealed, she said she would start paying UK tax on her income generated outside the UK.
