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Rachel Reeves to soften changes to non-dom tax regime after hearing ‘concerns’ Rachel Reeves to soften non-dom tax changes to woo rich for growth push
(about 2 hours later)
Chancellor says she will tweak finance bill amid effort to attract business leaders and entrepreneurs to UK Tweak to finance bill is part of Labour push to show UK is attractive place to invest
Rachel Reeves has said she will amend the finance bill to soften planned changes to the tax regime for “the non-dom community” after intense lobbying from wealthy UK residents. Rachel Reeves will amend the finance bill to soften planned changes to the non-dom tax regime as Labour woos the wealthy in pursuit of growth.
In the latest evidence of the government’s determination to roll out the red carpet for businesses and investors in an effort to kickstart growth, the chancellor said she would tweak tax arrangements announced in her October budget for those claiming non-domiciled status. Speaking at the World Economic Forum in Davos, Switzerland, where she has been meeting business leaders and entrepreneurs, Reeves said: “We have been listening to the concerns that have been raised by the non-dom community.”
The current regime allows these non-doms usually a wealthy resident in Britain whose father was born overseas to avoid paying UK tax on their overseas earnings in exchange for fees for up to 15 years. Reeves is replacing this with a shorter residence-based regime from April. The mooted change is relatively minor – a tweak to the rules governing the three-year transitional regime to allow wealthy taxpayers to adjust to the phasing-out of non-dom status.
“We have been listening to the concerns that have been raised by the non-dom community,” the chancellor told the Wall Street Journal editor-in-chief, Emma Tucker, at a fringe event at the World Economic Forum meeting in Davos, in comments first reported by the Times. But it is the latest in a blitz of Labour policies aimed at signalling loudly the party’s determination to make the UK an attractive place to invest.
This week alone, Labour has forced out the chair of the competition regulator, Marcus Bokkerink, announced restrictions on legal challenges to big infrastructure projects and promised to review the visa regime for high-skilled migrants.
The Treasury also waded into a supreme court case over car financing after banks had complained about the risks of paying huge compensation to consumers.
The business secretary, Jonathan Reynolds, who is in Davos with Reeves selling UK plc, said: “We have a great pitch to make. We are talking to people who want to invest in the UK who are I think seeing, first of all, our pitch to political stability, certainly relative to other European countries, and our commitment to openness.”
The current non-dom regime allows individuals claiming the status – usually wealthy residents in Britain whose father was born overseas – to avoid paying UK tax on their overseas earnings in exchange for fees for up to 15 years. Reeves is replacing this with a shorter residence-based regime from April.
The planned changes relate to the rules governing the temporary repatriation facility – a transitional arrangement that will last three years from April 2025.The planned changes relate to the rules governing the temporary repatriation facility – a transitional arrangement that will last three years from April 2025.
First announced by the Conservative chancellor Jeremy Hunt, the facility will allow non-doms to bring overseas income into the UK and pay a reduced tax rate. Reeves extended it from two years to three in her budget. First announced by the Conservative chancellor Jeremy Hunt, the facility will allow non-doms to bring overseas income into the UK and pay a reduced tax rate of 12-15%. Reeves extended it from two years to three in her budget.
However, wealthy individuals had complained that the rules around the facility had been too tightly drawn, excluding some types of investment fund. The Treasury has now signalled that these will be tweaked. However, wealthy individuals had complained that the rules around the facility had been too tightly drawn, excluding the proceeds of some types of investment. The Treasury has now signalled that these will be tweaked.
Those using the scheme will pay 12% tax on any income brought into the UK for the first two years and 15% in the third year. The shadow chancellor, Mel Stride, seized on the plans as evidence that Reeves’s budget policies were driving people away. “Labour simply does not understand business and the economy, and working people are paying the price,” he said.
Treasury sources insisted the change had not come as a result of recent reports of an exodus of wealthy individuals from the UK. Treasury sources insisted the change had not come as a result of reports of an exodus of wealthy individuals from the UK. Reynolds confirmed the planned change, telling journalists in Davos: “There is a tweak to the finance bill Of course, when you’re changing a tax regime, people will want to know, and there’ll be some uncertainty there, so we’ve got to get that message out.”
The business secretary, Jonathan Reynolds, later confirmed the planned change, telling journalists in Davos: “There is a tweak to the finance bill.” He and Reeves have been touring events and parties at Davos sending the message that the UK is open for business with the chancellor saying that growth has to “trump” other concerns, including the government’s commitment to net zero.
He added: “Of course, when you’re changing a tax regime, people will want to know, and there’ll be some uncertainty there, so we’ve got to get that message out.” Hunt announced he was going to scrap the 225-year-old non-dom tax scheme a relic of Britain’s colonial past in his budget last spring. Labour promised in opposition to go further than Hunt’s replacement system, and Reeves announced the registration-based regime in her 30 October budget.
Reeves and Reynolds have been touring events and parties at Davos sending the message that the UK is open for business – with the chancellor saying that growth has to “trump” other concerns, including the government’s commitment to net zero.
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The business secretary said: “We have a great pitch to make. We are talking to people who want to invest in the UK who are, I think seeing, first of all, our pitch to political stability, certainly relative to other European countries, and our commitment to openness.”
The non-dom regime is a relic of the UK’s colonial past, and allows those who claim the status to avoid paying tax on their overseas earnings in the UK.
Hunt announced he was going to scrap the 225-year-old tax scheme in his budget last spring. Labour promised in opposition to go further than Hunt’s replacement system, and Reeves announced the registration-based regime in her 30 October budget.
The current regime protects overseas earnings from UK income tax for up to 15 years, but there were ways to preserve inheritance tax benefits after that time. Reeves’s moves to close these loopholes have been cited by some non-doms as a main reason for them quitting the UK.The current regime protects overseas earnings from UK income tax for up to 15 years, but there were ways to preserve inheritance tax benefits after that time. Reeves’s moves to close these loopholes have been cited by some non-doms as a main reason for them quitting the UK.
A Treasury spokesperson said: “While we do not expect these changes to impact the £33.8bn of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at budget operate as intended.A Treasury spokesperson said: “While we do not expect these changes to impact the £33.8bn of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at budget operate as intended.
“The temporary repatriation facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”“The temporary repatriation facility is designed to encourage non-doms to bring their funds to the UK, encouraging them to spend and invest this money here.”
Reeves, Reynolds and the trade minister Sarah Jones met more than 20 company bosses from companies including Lloyds Banking Group, HSBC and Barclays at a lunch hosted by the Confederation of British Industry and the accountancy firm KPMG in Davos on Thursday.
“Reeves was good in the sense that they understood that the message has to be more positive and everything has to be seen through the growth lens,” said one attender at the event in the Swiss resort’s Belvédère hotel.
“There’s a commitment to do a lot more in the coming months to keep the momentum going and try to change the narrative. They’ve realised it has to be reset after the budget and I think they are doing it. It was a good delegation and they are saying the right thing.”
Another said the tone was “friendly, warm and respectful”, adding: “Questions were very tame. There was a sense of ‘Thanks for being here and putting on a good show for the UK.’”