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Rachel Reeves is set to make a change to the UK Government's crackdown on non-resident residents in a bid to allay concerns over tax reforms announced in the October Budget.
The Chancellor said at a side event on the sidelines of the World Economic Forum in Davos on Thursday that the government will soon present an amendment to its draft finance law.
This will allow easier access to the Temporary Repatriation Facility, which allows non-residents to bring foreign income and gains made before April 2025 into the UK and pay tax at a reduced rate of 12 per cent in the 2025-26 and 2026-27 tax years, rising to 15 per cent in the period 2027-2028 – compared to the maximum income tax rate of 45 percent.
The change planned by the government would make it easier for some funds to access fixed facility tax rates. But while this measure may be beneficial to some non-residents, it is unlikely to change the situation for many.
Reeves He said at a Davos event organized by the Wall Street Journal on Thursday that the government was “listening to the concerns raised by the non-resident community”, in response to a question about the increase in the net number of millionaires leaving the UK in recent months. .
Business Secretary Jonathan Reynolds later confirmed the planned change, which was first reported by The Times, He told reporters in the Swiss mountain resort: “There is an amendment to the draft finance law. . . When you change the tax system, people will want to know about that, and there will be some uncertainty there, so we have to get that message across.
Reeves announced in the Budget that she had scrapped the non-resident regime, which allows UK tax residents whose permanent home or “domicile” is abroad to avoid paying UK tax on their foreign income or capital gains for 15 years.
It will be replaced as of April 6, 2025, with a four-year term Residency based scheme To provide “internationally competitive arrangements for people coming to the UK on a temporary basis”.
Downing Street said the change would not lead to a reduction in taxes on replacing the non-resident system, and the Treasury still expects to raise £33.8 billion over the next five years from the reforms.
Non-residents were most concerned about changes to inheritance tax on existing trusts, with the issue often cited as the main factor prompting them to leave the country.
Rachel de Souza, tax partner at RSM UK, said that while increasing temporary repatriation facilities was a “good step”, it was “woefully inadequate” to prevent wealthy non-residents leaving the UK.
“The way to stop this exodus would be to maintain the IHT exemption to offshore trusts, but also reverse the proposed changes to agricultural and commercial property relief that affect farmers and entrepreneurs.”
“It's reassuring to see that they are finally responding to the concerns of the many people affected by this, but I don't think that will be enough,” said Robert Broderick, a partner at law firm Payne Hicks Beach. To stem the tide. . . It's helpful, but exposure to inheritance tax is the biggest nail in the coffin.”
The Chancellor also said on Thursday that she wanted to allay concerns of countries including India that the rule changes would not affect double taxation agreements: “That is not the case: we will not change those double taxation agreements.”
A Treasury official said: “We are always interested to hear ideas for making our tax system more attractive to talented entrepreneurs and business leaders from around the world to help create jobs and wealth in the UK.”
