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Rachel Reeves is set to make a change to the UK government’s crackdown on non-domiciled residents in an attempt to allay concerns about the tax reforms announced in October’s Budget.
The chancellor told a fringe event at the World Economic Forum in Davos on Thursday that the government would soon table an amendment to its own finance bill.
This will enable easier access to the temporary repatriation facility, which allows non-doms to bring foreign income and gains made before April 2025 into the UK and pay tax at a discounted rate of 12 per cent in the 2025-26 and 2026-27 tax years, rising to 15 per cent in 2027-28 — compared with the maximum income tax rate of 45 per cent.
The change planned by the government would make it easier for certain funds to access the facility’s flat tax rates. But while the measure may be useful for some non-doms, it is unlikely to move the dial for many.
Reeves said at The Wall Street Journal’s Davos event on Thursday the government had been “listening to the concerns that have been raised by the non-dom community”, responding to a question about an increase in the net number of millionaires leaving the UK in recent months.
Business secretary Jonathan Reynolds later confirmed the planned change, first reported by The Times, telling journalists in the Swiss mountain resort: “There is a tweak to the finance bill . . . when you’re changing a tax regime, people will want to know, and there’ll be some uncertainty there, so we’ve got to get that message out.”
Reeves announced in the Budget that she was abolishing the non-dom regime, which allows UK tax residents whose permanent home or “domicile” is overseas to avoid paying British tax on their foreign income or capital gains for 15 years.
It will be replaced from April 6 2025 by a four-year residence-based scheme to offer “internationally competitive arrangements for people coming to the UK on a temporary basis”.
Downing Street said the change would not lead to a fall in the tax take from replacing the non-dom regime, and the Treasury still expects to raise £33.8bn over the next five years from the reforms.
Non-doms have been most concerned about changes to inheritance tax on existing trusts, with the issue often mentioned as the key factor driving them to leave the country.
Rachel de Souza, tax partner at RSM UK, said that while an increase to the temporary repatriation facility was “a good move”, it was “woefully inadequate” to prevent wealthy non-doms from leaving the UK.
“The way to stem this exodus would be to maintain the exemption from IHT to offshore trusts, but also reverse the proposed changes to agricultural and business property relief which impacts the farmers and entrepreneurs.”
Robert Brodrick, a partner at law firm Payne Hicks Beach, said: “It’s reassuring to see that they are at last responding to the concerns of the many people who are affected by this, but I don’t think this is going to be enough to stem the tide . . . It’s helpful but the inheritance tax exposure is the biggest nail in the coffin.”
The chancellor also said on Thursday she wanted to allay concerns from countries including India that the rules changes would not affect double-taxation agreements: “That’s not the case: we are not going to be changing those double-taxation conventions.”
A Treasury figure said: “We’re always interested in hearing ideas for making our tax regime more attractive to talented entrepreneurs and business leaders from around the world to help create jobs and wealth in the UK.”
