13 Feb, 2008
Published: 10:09 Wednesday 13 February
By: Michelle McGagh, News Reporter
Chancellor Alistair Darling has had to
retreat from a proposed tax clampdown on resident non-domiciles
(RNDs) after the financial industry warned that wealthy foreigners
were preparing to quit the UK.
An advantageous tax regime for RNDs has brought an estimated
£125 billion in investment and business to the country but
Darling's proposal to make them disclose details of their offshore
income even if it was not being remitted in the UK had left many
considering a new country of residence.
Although the Chancellor has confirmed that RNDs will not have to
disclose any offshore income, they will still be liable to the
£30,000 levy set out in the pre-Budget report.
Those living in the UK pay tax on income earned in the country but
not on money earned outside of the UK; the £30,000 will
preserve that. Darling hopes to raise £800 million form the
But many tax experts believe that the u-turn comes too late, with
many people already considering moving their business and
investment to a more tax advantageous country.
According to a survey by Society of Trust and Estate Practitioners
(STEP), more than £40 billion of investment could be lost
from the UK.
STEP surveyed 85 members who advise a total of 22,000 resident
non-domiciles with a combined investment of £44.87 billion.
They make up 19% of the total number of RNDs in the UK that have an
estimate investment of £125 billion.
Over a third of RNDs said they were leaving or considering leaving
the UK after the chancellor changed the tax position for overseas
trusts and companies to make them liable to an 18% capital gains
tax (CGT) charge whether or not the money is brought into the UK.
The gains were previously not taxed.
Of those planning to leave the UK, 2,741 are ultra-high-net-worth
individuals with investable assets of over £15 million and
represent over half the super wealthy in the UK.
Keith Johnston, STEP director of policy and communications, said
the cost to UK investment could be significant.
'Our membership is very unhappy with the tax proposals,' he said.
'Many will be hit with a huge tax bill because of the CGT changes
and will simply decide to sell their UK assets or move their
companies out of the UK.'
For those thinking of leaving, Switzerland was the most popular
alternative - 78% of members said their clients would move there to
take advantage of a tax bill that is based on the cost of living.
Of the reason for leaving, 27% of STEP members said a loss of
confidence, 20% said the CGT changes and 18% cited the credibility
of the £30,000 levy.
Around 68% of members said a statutory residence test for RNDs
should be introduced so that there is no room for misinterpretation
or change in their tax positions.