Labour reveals plans to hit wealthy ‘non-doms’ even harder than Tories

One of the world’s most famous law firms has warned that Labour’s plan to raid ‘non-doms’ and raise £2.6 billion to fund its spending plans will persuade wealthy people to leave the UK, taking their ‘spending, investment, businesses and employment with them’.

The prediction from Mishcon de Reya may chill the gilded offices of many estate agencies who operate within London’s prime and super-prime markets, where many ‘non-doms’ tend to own or rent properties.

Non-doms are residents whose permanent home – or domicile – for tax purposes is outside the UK. It refers to their tax status and has nothing to do with their nationality, citizenship or resident status.

Taxpayers

Hunt said ‘new arrivals’ or in other words not existing non-doms would not be required to pay tax on their foreign income or gains for four years, but after that would be levied at the same rates as other UK taxpayers.

But Labour wants to go much further and harder including removing the 50% foreign income exemption.

Speaking to BBC Radio 4’s Today programme to reveal her party’s proposed ‘crackdown’, shadow chancellor Rachel Reeves (main image) said: “Today is about asking the wealthiest in our country to pay their fair share of tax to fund our public services”.

Only a few weeks ago Jeremy Gee, a senior at prime specialist Beauchamp Estates wrote in The Negotiator on Hunt’s changes.

He said: “While the announced changes may potentially increase direct Treasury income, there may also be a hidden cost, as spending on services and goods by those electing to spend less time in the UK reduces”.

Reeves also said on the Today programme that the ongoing ability of non-doms to avoid paying inheritance tax in the UK was also ‘wrong’.

Reaction

Anthony Whatling, MD at Alvarez & Marsal Tax, says: “While the 50% foreign income exemption was designed to ease the transition to new proposed tax rules, Labour’s plan to remove it is unlikely to significantly affect non-doms or prompt them to leave the UK en masse.

“More worrying is Rachel Reeves’ announcement that a Labour government would remove certain inheritance tax benefits for non-UK trusts. This reform could intensify uncertainty, with the prospect of a 40% tax on certain assets more likely to influence non-doms’ decisions to stay in the UK, and casting doubt on the anticipated revenue boost from these changes.”