According to sources, the Treasury dismantled a team responsible for offshore and non-resident tax policy just weeks before unveiling major revisions to the taxation of foreign residents in the budget.
A team of experts, focused on offshore taxes, also consisted of specialists in non-dom policies. These individuals, according to sources, were responsible for assisting in the implementation of a new replacement for non-dom status announced by the chancellor this week.
Officials are concerned that the Treasury may not be adequately prepared for the upcoming influx of lobbying from the wealth advisory industry. This industry is currently attempting to reverse or modify the elimination of the tax break.
A memo within a City law firm, which specializes in assisting clients with complicated offshore tax issues, states that the firm anticipates a surge in efforts to preserve the advantages of offshore status. This includes setting up offshore trusts while still claiming the status, in order to avoid paying UK inheritance tax. These actions are expected to take place before any upcoming changes are implemented.
Another legal firm instructed employees who handle offshore affairs to refrain from scheduling time off during the initial quarter of 2025. Jeremy Hunt announced the discontinuation of non-domicile status and the associated tax benefits, effective from April 2025.
Under this system, individuals who have ties to another nation and state their intention to eventually depart from the UK can be exempt from paying taxes on their earnings and profits from assets held outside of Britain.
Despite the tax break being a remnant of colonial times, individuals residing in the UK are still liable to pay taxes on their income. This loophole has allowed some of the country’s wealthiest individuals to evade paying millions in taxes.
The criteria for determining non-domicile status is not clearly defined. HMRC commonly uses a guideline of whether an individual’s father was born outside of the country.
Tax professionals have consistently maintained that this incentive encourages individuals with high net-worth to keep their wealth offshore.
After residing in the country for 15 out of the last 20 years, non-domiciled individuals are no longer allowed to utilize their status for income tax purposes. This is a voluntary option and must be actively applied for by the individual through the remittance basis.
In order to qualify for breaks, individuals must annually pay £30,000 if they have resided in the UK for at least seven tax years out of the last nine years. The fee increases to £60,000 per year if they have lived in the country for 12 out of the past 14 years.
Certain tax exemptions for foreign assets will remain intact after the changes. Individuals who currently receive this benefit will still be able to use a trust to avoid UK inheritance taxes. This could be a significant advantage that lasts longer than any immediate savings based on income.
The Department of the Treasury has been reached out to for a response.
Source: theguardian.com
