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Wealthy residents who register their permanent home overseas are fleeing the UK for locations such as the UAE over Labour’s promised clampdown on so-called non-doms, a city wealth lawyer has warned.
For more than 200 years, the system, which was recently overhauled by the Conservative government, allowed wealthy people to live in the UK and avoid paying tax on their overseas income.
But Labour – which looks set to win an overwhelming majority in Thursday's general election – has vowed to close the “non-dom tax loophole”.
The treasury security, Chancellor of the Exchequer Jeremy Hunt, announced in the spring budget the scheme would be replaced from 2025 and new residents would not be required to pay tax on foreign income and financial gains for only the first four years of their time in the UK. But after that period ends, those who choose to stay will pay the same rate of tax as other residents.
But Labour claimed the policy did not go far enough, saying as it stood non-doms would receive a discount of 50 per cent on the foreign income they bring into Britain in the first year.
Shadow chancellor Rachel Reeves said Labour would carry out a “crackdown” to make sure “every penny” goes into the National Health Service and schools.
In 2022, the then-chancellor Rishi Sunak's wife Akshata Murty, an Indian citizen, announced she would pay UK taxes on all her worldwide income after it was disclosed that she was non-domiciled in Britain for tax purposes.
Alessandro Belluzzo, a barrister and founding partner of Belluzzo International Partners, told The National: “We know with the Conservatives that they’re going to change it, they proposed the changes and the changes were quite clear. They are coming from the concept of domicile to residency.”
There is no clarity about what Labour will do, he added.
“Will Labour cancel completely all rules to attract international people? Because I am not talking about dom or non-dom,” said Mr Belluzzo.
“This concept is finished. It’s no longer applicable. What I am saying is, is the UK still a possible platform for international people? Will people be attracted by the UK? Is there any kind of plan Labour will put forward?"
If Labour cancels all proposals then the country might have a problem, he said.
“Many people who came to the UK were not British. But they have done pretty well here, so why cancel the attraction?” he added.
David Lesperance, a taxation and citizenship adviser, and managing director of Lesperance and Associates, told The National there are essentially two types of non-doms: foreign citizens who work in the City of London, who derive most of their income from the UK and are unlikely to leave as a result of Labour's new plan; and ultra high net worth individuals (UHNWIs), who are foreign citizens and almost certainly will leave.
UHNWIs do not need to remain in London to make or maintain their wealth and can arrange their affairs to ensure they have minimal foreign income.
"However, with Labour's announcement regarding protected and excluded property trusts, exposure of worldwide assets to 40 per cent inheritance tax is a major shove out the door for this group," Mr Lesperance said.
"As a result, they are highly likely to leave the UK."
Up to 30 per cent of current non-doms are predicted to leave, according to estimates.
Mr Belluzzo said he knows of families already fleeing the UK.
“If you talk to people they say there are many people moving now, because entrepreneurs, families, they don’t wait for the politicians to choose for them. They prefer to choose themselves if they decide the UK is less attractive for them,” he said.
Nom-doms are moving to places such as Italy, where Mr Belluzzo helped develop a flat rate of tax for non-domiciled residents of €100,000 ($107,320) in 2017, Monaco, Switzerland and the UAE, all of which offer incentives to wealthy investors looking to move.
Mr Belluzzo’s company recently opened an office in Dubai in response to requests from clients.
UK general election campaigning - in pictures
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Conservative leader Rishi Sunak speaks at party campaign event at the National Army Museum in London on Wednesday, July 3. AP Photo -
Satirical political character Count Binface in London before challenging Conservative leader RishiSunak for the parliamentary seat of Richmond and Northallerton. Reuters -
Boris Johnson, former UK prime minister, campaigns for the Conservatives in London. Bloomberg -
Nigel Farage, leader of the far-right Reform UK Party, with heavyweight boxer Derek Chisora during a campaign visit to Clacton-on-Sea in eastern England. Reuters -
Mr Sunak holds a speech during his visit to Well Healthcare Supplies as he campaigns in Stoke. Getty Images -
Mr Starmer laughs as he speaks to supporters near Milton Keynes. AP -
Mr Davey bungee jumps during a visit to Eastbourne Borough Football Club in East Sussex. AP -
Mr Sunak bowls during his visit to Nuneaton Cricket Club. AFP -
Mr Starmer addresses an audience of Labour Party members and supporters during a rally at the Royal Horticultural Halls in central London. AP -
Mr Davey rides a towable inflatable during a visit to Lakeside Ski & Wake, in the Cotswolds. Reuters -
Mr Sunak and his wife Akshata Murty visit the BAPS Shri Swaminarayan Mandir in London. AFP -
Mr Davey participates in a Zumba class with supporters in Wokingham. Reuters -
Mr Sunak delivers a speech in central London. AFP -
Mr Davey jet-washes an ambulance in London. Getty Images -
Mr Sunak turns on the power in the training centre control room during a tour of the Sizewell B nuclear power plant. AFP -
Mr Davey plays a game of Frisbee on a visit to a farm in Hampshire. AP -
Mr Sunak speaks to journalists on the campaign bus following the launch of the Welsh Conservatives General Election manifesto near Rhyl. Reuters -
Mr Farage speaks to the press in Clacton-on-Sea. Bloomberg -
Mr Starmer speaks at the launch of the Labour party's 2024 general election manifesto in Manchester. AP -
Mr Sunak answers questions from the audience in Grimsby. Getty Images -
Mr Davey toasts a marshmallow as he visits Willow Forest School in Surrey. EPA -
Mr Farage attends the launch of the Reform UK manifesto in Merthyr Tydfil, Wales. Reuters -
Scottish Labour leader Anas Sarwar launches Scottish Labour’s battle bus campaign on June 17 in South Queensferry, Scotland. Getty Images -
Britain's Labour Party politician and Shadow Secretary of State for Health and Social Care Wes Streeting speaks to a television crew outside the BBC in London. AFP -
Mr Sunak meets pupils in a maths class during a visit to the John Whitgift Academy, in Grimsby. AP -
Mr Davey during a general election campaign visit to the Aqua Jungle Spot in Stratford-upon-Avon. Bloomberg -
Mr Sunak and Akshata Murty take centre stage at the Conservative Party's general election manifesto launch in Towcester. Getty Images -
Mr Starmer passes a toothbrush to a child during his visits to the Whale Hill Primary School in Middlesbrough. AP -
Mr Davey meets Steve Darling, Liberal Democrat candidate for Torbay and his guide dog Jennie at Torquay Harbour. Getty Images -
Reform UK leader Nigel Farage reacts after something is thrown towards him on the campaign bus in Cawthorne, Barnsley. AP -
Mr Davey on the 'Rush' ride during a Liberal Democrats general election campaign event at Thorpe Park. Reuters -
Mr Starmer visits Brent Cross town's visitor pavilion for a housing launch in London. Getty Images -
Mr Sunak during a visit to Leander Club, in Henley-on-Thames, as a boat carrying Liberal Democrat supporters passes behind him. Reuters -
Mr Davey plays Jenga using symbolic 'blue wall' blocks in Stockport. EPA -
Mr Farage has a milkshake hurled at him during a campaign event in Clacton-on-Sea. EPA -
Labour launch their election campaign bus, with Mr Starmer, his deputy Angela Rayner and Rachel Reeves, shadow chancellor, in Uxbridge. Getty Images -
Mr Sunak feeds lambs as he visits Rowlinson's Farm during a Conservative general election campaign event in Gawsworth. Reuters -
Mr Sunak holds a question and answer session during a visit to Niftylift in Milton Keynes. EPA -
Mr Davey and Anna Sabine, parliamentary candidate for Frome and East Somerset, ride the Ultimate Slip 'n' Slide at Eastcote Farm in Beckington. Bloomberg -
Scottish National Party Leader John Swinney speaks during a visit to The Dower House Cafe in Edinburgh. AP -
Nigel Farage at the cliffs in Dover after speaking at a Reform UK event. Getty Images -
Akshata Murty, wife of Mr Sunak, meets with residents during a visit to a Royal British Legion care home in Ripon. Getty Images -
Rishi Sunak campaigning in Amersham, Buckinghamshire. EPA -
Mr Starmer addresses party members and media in Lancing Parish Hall, West Sussex. Getty Images -
Mr Sunak visits a maritime technology centre in Belfast, Northern Ireland, as he campaigns for the general election on July 4. Reuters -
Mr Starmer and his Scottish counterpart, Anas Sarwar, greet supporters at the launch of the Scottish Labour general election campaign at Caledonia House in Glasgow. Getty Images -
Mr Sunak speaks with members of staff at the Global Energy Group facility at the Port of Nigg in north-east Scotland. AFP -
Richard Tice, the leader of Reform UK, attends an election campaign launch in London. AP -
Mr Sunak holds a Q&A with staff of a West Transport distribution centre in Ilkeston in the East Midlands. AP -
Labour's deputy leader Angela Rayner and Mr Starmer arrive at Gillingham FC. Getty Images -
Mr Sunak takes questions from workers at West Transport. Getty Images -
Mr Sunak poses for a selfie in Ilkeston. AFP
“I think the system is very well organised. People are going there,” he said.
“And they are going there for the same reasons people were coming to the UK 20 or 30 years ago, for an opportunity, for business, because they see there is an openness to business.
“And we see a lot of people moving to Dubai and Abu Dhabi, to the region.”
Mr Belluzzo said Labour should signal that it is open to international investors in the early days of a new government, if it is successful in the general election on Thursday.
He said the UK has always been a welcoming country and he wants it to remain competitive.
“Labour is just saying we will scrap the non-doms and that’s it.
“But are they going to do something else afterwards? I believe so. I hope so.”
