Proposed UK Temporary Residence Plan Clashes With Immigration Policy – Fragomen

Tom Burroughes

14 June 2024

The proposed end of the UK’s resident non-domicile (“non-dom”) system – a policy of both the Conservative and Labour parties – clashes with immigration policy, according to law firm regime,” she said.

“The attractiveness of the UK for high value and highly mobile investors is being increasingly questioned, and that should worry UK politicians across all political parties. This misalignment of tax and immigration rules will only raise further questions and concerns and possibly deter foreign nationals from considering the UK as a destination of choice,” the lawyer continued.

“Conversations with clients have underscored the need for agility in navigating the evolving landscape. As the UK undergoes these profound shifts in election dynamics, foreign nationals are urged to recalibrate their strategies to adapt to the evolving landscape,” Nechita added.

One element of the debate relates to what is sometimes called "supply-side" economics – the idea that raising tax rates beyond a certain point reduces rather than increases revenues. In a world without exchange and capital controls, where money is mobile, high taxes on HNW individuals can backfire, on this argument.

Inheritance tax
As already noted by this news service, inheritance tax bills may be a decisive factor pushing non-doms to quit the UK.

In its manifesto yesterday, the Labour Party said: “We will end use of offshore trusts to avoid IHT so that everyone who makes their home here in the UK pays their taxes here.” For some non-doms, this is a deal-breaker, lawyers have told WealthBriefing.

At issue is whether – because a number of other European countries have regimes resembling non-dom systems (Italy, Ireland and Greece, for example) – there will be an exodus of HNW individuals, leading to a net loss of revenue to the UK Treasury, rather than a hoped-for gain, advisors fear.

Not everyone is sceptical about the proposed new temporary residency system, as shown by this story.

On a separate topic, the Labour Party’s manifesto said that if elected, it would close the “loophole” of enabling performance-related pay to be treated as a capital gain.