Rachel Reeve to soften UK tax reforms

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Rachel Reeves is set to make changes to the UK government’s crackdown on non-residents to avoid the threat of tax reforms announced in the October Budget.

The Chancellor told a Fringe event at the World Economic Forum in Davos last Thursday that the government would soon present its own finance bill reform.

This will allow easier access to the temporary repatriation facility, which will allow foreign earnings and profits to be brought back to the UK before April 2025 and be taxed at 12 per cent in 2025-26 and 2026-27. It rises to 15 per cent in 2027-28 – compared to the top income tax rate of 45 per cent.

The government’s proposed change will make it easier for certain funds to get flat institutional tax rates. But while the parameter may be useful to some non-doms, it’s impossible to move the dial for many.

Reeves Speaking at a Wall Street Journal event in Davos on Thursday, the government was “listening to the concerns of the non-dom community” in response to a question about the rise in the number of high-net-worth millionaires leaving the UK in recent months. .

Business Secretary Jonathan Reynolds later confirmed the proposed change, first reported by The Times, “There is an adjustment to the financial balance,” he told reporters in a Swiss mountain resort. . . When you’re changing the tax system, people want to know, and there’s going to be some uncertainty, so we need to communicate that message.

Reeves announced in the Budget that she is scrapping the non-domestic rule, which allows UK tax residents with their permanent home or “domicile” overseas to avoid paying British tax on their foreign income or capital for 15 years.

It will be replaced by four years from 6 April 2025. Residential based scheme To provide international competitive events for people coming to the UK temporarily.

Downing Street said the change would not result in tax cuts replacing the non-dom regime, and the Treasury still expects to collect £33.8bn over the next five years from the reform.

Non-doms are particularly concerned about changes to inheritance tax on existing trusts, an issue often cited as a key reason for them to leave the country.

Rachel de Souza, tax partner at RSM UK, said the increase in the temporary repatriation facility was a “good step” but preventing the non-wealthy from leaving the UK “is not enough”.

“The way to stop this migration is to keep the exemption from IHT to offshore trusts, but to reverse the changes to agricultural and commercial property relief for farmers and entrepreneurs.”

“It’s comforting to see that they’re finally responding to the concerns of the many people affected by this, but I don’t think it’s going to be enough to stem the tide,” said Robert Broderick of the Hicks Beach law firm of Payne. . . It’s important but inheritance tax exposure is the biggest nail in the coffin.

The chancellor said on Thursday that she wanted to dispel concerns that the changes to the rules would not affect bilateral tax treaties, including with India, saying: “That’s not the case, we’re not going to change those double tax treaties.”

A Treasury official said: “We are always keen to make our tax regime more attractive to talented entrepreneurs and business leaders from around the world to help create jobs and wealth in the UK.