FT readers respond: Wealthy non-doms plan to leave UK

Whoever wins next week’s general election, one thing is clear: the UK’s two-century old non-domicile tax system will be scrapped.

That realisation has led to fears of an exodus of non-doms. A recent Financial Times article on the topic generated more than 2,000 comments from readers.

Some thought the proposals will help the next government increase tax revenue; others, that they will diminish the UK’s ability to attract foreign investment; some were adamant that capital flight was already happening.

Here is a flavour of what our readers thought:

What the debate often misses, however, is that there are different types of wealthy non-doms and this has an impact on whether they will be more likely to stay in the country or hasten their departure from the UK.

“A banker from France, living in London for years, with his or her children at local schools, probably doesn’t get much benefit from the non rules. Most of their earnings are PAYE-taxable. They have roots here. They’re not going to move,” says Dan Neidle, founder of the Tax Policy Associates think-tank.

“But an Arab oil sheikh who currently spends four months a year in the UK, and has houses in four continents, is absolutely not going to stick around and see his global assets taxed.”

Ultra high-net worth non-doms, who are not in paid employment and live off their investments, as well as private equity bosses, would also be more likely to leave, he added.

Non-doms working in the City “have significant life inertia” and would be unlikely to leave, said David Lesperance, founder and principal of international tax advice firm Lesperance & Associates.

However, the second category of wealthy non-doms are “centimillionaires to billionaires”, he added. They are much more likely to depart, particularly given Labour’s plan to remove the ability for non-doms to shelter their assets permanently from inheritance tax in trusts.

“Labour’s announcement regarding protected trusts — exposure of worldwide assets to 40 per cent IHT — is a major shove out the door for the richest non-doms. If there is any possibility of a future increase in capital gains tax, IHT or a wealth tax this will add petrol to a bonfire,” he said.

Some FT readers were unconcerned if such ultra-wealthy people left.

However, several commentators worried that scrapping the non-dom regime would ultimately lead to a reduced tax take.

Neidle said that if several non-doms living primarily off their wealth left the country this would not have much impact in terms of tax.

“These non-doms likely pay almost no tax in the UK right now (just indirect tax, such as VAT and stamp duty, but they often avoid both),” he said. “They clearly do however have an economic impact on the UK given they spend a lot of money on expensive or high status items and services.”

Understanding the wider economic impact from the likely flight of ultra-wealthy non-doms was an important part of the equation but there was a lack of data about this, he said.

“Does the UK benefit, because our economy is at capacity and jobs will move into more productive — and some would say “socially useful” — sectors? And . . . benefit from asset prices falling, particularly house prices,” he asked. “Or does the UK lose out, because these non-doms create highly paid jobs which will not be replaced by equivalent jobs?

“This seems to be a very important question, so I’m a bit depressed that nobody seems to be looking at it.”

Lesperance agreed with readers who said the decision to scrap the non-dom status would make the country poorer. “The most significant loss of tax revenue to the UK Treasury will be from the ultra high net worth non-doms who leave. A perfect example is [Prime Minister Rishi Sunak’s wife] Akshata Murty, who paid £4.4mn in UK tax in her last year under the remittance basis. Ultra high net worth non-doms . . . will leave because of the proposed 40 per cent IHT hit on their worldwide assets.”

Rachel de Souza, tax partner at RSM UK, said her experience was that non-doms did not want to pay 40 per cent IHT on their assets when they died.

“Often, their wealth has been generated outside the UK and before they became resident here and they feel it is unfair for the UK government to tax that wealth on death,” she said.

How a future government chooses to handle the inheritance tax issue would “have a significant impact on the decisions non-doms will make”, she added.

Some FT readers suggested that an incoming Labour government could soften its policy on non-doms:

Others thought it would be the thin end of the wedge:

Join the conversation by sharing your views.

*Comments have been edited for length and style