Tax Talk: Non-dom regime scrapped

Tax Talk is a regular series written by FSL’s tax expert, Alex Ranahan. Alex has nearly ten years experience as a tax adviser and analyst. He is accredited by the The Association of Taxation Technicians and was recently elected co-chair of the Tax Committee for The Investing and Saving Alliance.

The biggest story in the world of wealth management following the 2024 Spring Budget was surely that the remittance basis of taxation for individuals resident in the UK and domiciled overseas will be abolished from April 2025. 

The ‘non-dom’ regime has existed since the days of the British Empire and, though amended and curtailed on occasion, has persisted through governments of all stripes. 

It is well known that the opposition Labour Party had abolition of the non-dom regime as a key plank of its policy platform. The party said that money the regime’s abolition would raise would be used to fund a variety of spending pledges. Really, though, given that the amounts of government revenue involved are not vast, its utility was in signalling to voters that Labour intended to tax wealthy people ‘fairly’. 

Now that the Conservative government has adopted this policy too, our analysis must move to the best way to enact it. 

A poorly thought out plan?

The unfortunate problem for the government is that advisers in the area of taxation of non-domiciled individuals are essentially unanimous that the proposals are poorly thought out in their current form. 

Take the re-basing of capital assets. 

In 2017, the government announced a set of ‘deemed domicile’ rules to treat long-term residents of the UK as if they were UK domiciled.  To ‘soften the blow’ to those non-doms caught by these rules and who would now find themselves subject to a large tax bill on their overseas income and gains, the government allowed those impacted by the new deemed domicile rules to re-base their capital assets. In other words, allow them to reduce any capital gain made on a disposal of an asset to the difference between its sale price and its market value on 5 April 2017. 

This was an announcement in 2017 for a policy that would take effect from 2017 which used market values from 2017.   

By contrast, the re-basing announced under the abolition of the non-dom regime will use the market value of assets on 5 April 2019.  A policy announced in 2024, that will take effect from 2025, and uses market values from 2019.

Whatever the reason for this date being chosen – you may have seen theories – the important point is that the policy is poorly designed and may not even achieve its intention of reducing the sharp capital gains charge that a future, former non-dom will pay on these assets. 

The suggestion from some quarters is that the government intends to put this into legislation as quickly as possible in order to claim it as an achievement this side of a general election

All I can say is policy of this importance should not be rushed.