The upcoming Autumn Budget and its accompanying draft legislation will likely answer some of these questions, but that may come too late for non-doms and their advisers to develop and implement appropriate structures and strategies taking account of the new regime.
Is the grass always greener?
If the UK is no longer viable, where should non-doms go? Switzerland, Monaco, Italy, Malta, Dubai and the US, for example, all offer potentially attractive alternatives – though each is not without its downsides, either in a purely tax context, or arguably more generally.
To comment on just some of those jurisdictions:
- Switzerland: Switzerland has long been favoured by the wealthy for its low taxes, stable banking systems, and strong privacy protections. However, among other issues, those without an EU passport should be aware of complex property purchasing rules that can make it difficult for foreigners to buy real estate.
- Monaco: Monaco offers no tax on income, capital gains, or property, and its glamorous location adds to its appeal. However, property prices are extremely high, making it inaccessible for many.
- Italy: Italy’s flat tax initiative allows individuals who have lived outside the country for at least nine years to pay a flat levy on Figs, with foreign assets exempt from IHT for 15 years. However, the levy recently doubled to €200,000, which may indicate the scheme is falling out of favour.
- US (Florida): Florida offers no personal income, inheritance, or CGT at the state or local level. Low corporate taxes have attracted financial and tech firms, but rising property prices in areas like Palm Beach are a downside. Added to this is the federal tax exposure and estate tax rules, which are due to change in the coming years.
- Dubai: Dubai remains a popular choice for the wealthy, with no income tax and a 10-year renewable golden visa programme allowing long-term residency and property ownership. The climate is not to everyone’s tastes, however.
Conclusions
For many, the proposed changes will be too burdensome, prompting them to leave the UK. Others will find that the financial hit is outweighed by the benefits of remaining, such as access to world-class education, political stability, culture, and location. For some, the changes may even present advantages, at least in the short term.
Wealthy individuals holding assets across multiple jurisdictions will need to reassess their cross-border tax strategies. For example, someone holding property in the UK, investments in the US, and trusts in offshore jurisdictions must consider the interplay between UK taxation and the tax rules of these countries, especially in light of double tax treaties, changes to CGT, and how trusts will be treated under new UK rules.
For now, our advice must remain 'wait and see'. Our hands are tied until we see the government’s concrete plans, backed by (at least draft) legislation.
Presently, it would arguably be foolhardy for those affected taxpayers still remaining in the UK (or considering moving here) to take precipitate action based on rumours and press reports.
There is still much that needs to be confirmed, and the full picture will not be clear until draft legislation is published. Hopefully, the chancellor's Budget on October 30 will bring more clarity.
James Austen is a partner and Henry Lopes is an associate solicitor at Collyer Bristow
