The latest HMRC statistics show 13% reduction in the number of non doms and 6,000 fewer high net worth individuals in the UK. These numbers seem alarming and another string in ‘Project Doom’s’ bow, but it’s important to look at the reasons behind this seismic shift.
The reduction in the number of non doms is likely to be heavily influenced by the change in residency rules, meaning that after 15 years in the UK you are automatically deemed domicile. At the 15year mark people will either choose to remain in the UK, and will be no longer being classed as non dom, or will leave.
We are seeing a rise in the ‘tax nomad’ that is people who try to lose all residency status. However high net worth individuals are often globally mobile and can easily relocate overseas whilst conducting business in the UK.
It’s never straightforward. Whilst the tax regime may initially seem punitive, the UK has one of the most extensive tax treaty networks on a worldwide scale. Broadly speaking tax treaty arrangements with other countries give you credit against UK tax for tax paid in other jurisdictions.
For example, if you are a Canadian earning income in the UK and paying a higher rate of tax on your Canadian income, you will receive a credit for the tax you have paid in Canada and as a result you may pay little or no tax in the UK.
There is much debate about the direction the UK will take. In my view it would catastrophic if we created a hostile tax environment which led to more of the top 1% of tax payers leaving the country, however it does seem that Boris is ‘friendly’ towards high net worth individuals.