Investing.com -- Recent remarks by Rachel Reeves regarding non-domicile tax policy changes have added to the ongoing concerns over the UK's decreasing appeal to wealthy foreign nationals, rather than assuaging market fears. Despite rumors of a potential easing of the Temporary Repatriation Facility (TRF), these changes have not alleviated the growing concerns about the UK's diminishing attractiveness to high-net-worth individuals (HNWIs).
Darren Jones, Head of Global Technical Development at deVere Group, a global financial advisory firm, expressed his doubts about the changes' impact on the UK's appeal to foreign nationals. He stated that while changes to the proposed TRF flat tax rates were a step in the right direction, they were too limited in scope and duration.
Jones suggested that a viable Inheritance Tax (IHT) shelter for assets accumulated before UK residency and an extension of the Foreign Income and Gains (FIG) regime beyond its current 4-year cap would be necessary. However, he expressed skepticism about the likelihood of such changes, given Labour's limited ability to raise revenue elsewhere.
The rumored amendments to the TRF, including easier access and possibly lower flat tax rates, do not address the core issues that are driving the mass departure of HNWIs. These issues include the removal of the remittance basis of taxation, the introduction of IHT on the global estates of non-doms after 10 years of UK residency, and the erosion of tax planning opportunities due to stricter trust rules.
According to Jones, these policies discourage foreign nationals from staying in the UK longer than the initial four years allowed under the FIG regime. He also pointed out that the current framework unintentionally makes the UK a short-term haven for those looking to realize foreign gains tax-free, rather than encouraging long-term economic contributions.
Jones also raised concerns about the potential for wealthy UK nationals to leave the country for 10 years to take advantage of Non-Long Term Resident status. He suggested that this trend could snowball, with more individuals recognizing the benefits of spending a decade or more abroad and reclassifying as Qualifying New Residents when returning to the UK.
Despite Reeves' suggestions of flexibility within the TRF framework, there is little sign of a broader reconsideration of policies that are driving wealth, investment, and talent out of the UK. Without addressing the IHT measures and the restrictive FIG timeline, the UK risks further harm to its economic competitiveness and global appeal.
As the date of 6th April 2025 draws closer, the question remains whether Labour will implement substantial changes or if the exodus will continue to grow. Jones concluded by noting that for now, both foreign and UK HNWIs seem to agree that the grass is greener elsewhere.
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