Doms Away: Alternatives to the Abolition of the Non-Dom Regime
The UK’s non-dom tax regime, established over 200 years ago, is under scrutiny as this, and the previous government, have proposed its abolition;
It is expected that inheritance tax will be charged on the foreign income, gains, and trusts held by current non-doms, resulting in a likely exodus of those under this regime;
If the expected abolition to the status goes ahead in its current form, it would present a number of legally and fiscally frustrating scenarios. These include dead settlor events, confusions around the value of trusts and inheritances, withholding complications, and issues for transient residents (such as students);
Changes to inheritance taxes’ scope may also create a ‘tail’ effect, wherein emigres who die within 9 years of leaving the country (even if they have not returned in that period) would be in-scope for the tax. This could put off individuals becoming UK resident in the future;
The current non-dom system is confusing and requires urgent, simplifying reforms to increase tax revenues, bolster investment and economic growth, and deliver a more effective legal playing field;
In order to solve these problems and indeed, attract non-doms to the country, we recommend:
1. Introducing a £150,000 flat-tax for non-doms.
2. Considering a Swiss-style forfait system.
3. Creating a reduced-tax temporary worker status.
4. Offering incentives for non-doms to invest in UK assets.
5. Returning to a lower tax economy
6. Simplifying the UK tax system to reduce complexity and costs.
