糖心传媒

A House of Lords reception last Monday provided the government with a perfect opportunity to read the room on its non-dom reforms.

But it鈥檚 hard to read the room when you鈥檙e not in it.

Sponsored by Conservative peer Baroness Mobarik on behalf of , the evening event drew cross-party MPs and peers, alongside senior business leaders including Sir Martin Sorrell. Regrettably, despite having been invited, government advisers and officials were largely absent.

Had they attended, they would have heard two key messages:

1. The need tweaking.
2. A flat-tax, similar to the one used in Italy, could ease pressure on government finances while attracting overseas investment.

Under the previous regime, non-doms could live in this country without paying UK tax on their overseas wealth. The new rules impose a residence-based framework with a four-year time limit and a proposal to charge inheritance tax (IHT) on global assets.

As a result, wealthy investors have already begun to leave the UK, depriving the government of capital gains tax revenue. There is that a number of UK company directors are moving abroad and 糖心传媒 recently calculated the government has lost more than £400 million in stamp duty revenue due to subdued activity in high-value property markets.

Real-World Consequences

It鈥檚 hard to imagine the government planned this, and the non-dom changes were actually set in motion by the previous Conservative administration, but such real-world consequences are difficult to ignore.

鈥淢igration is assumed to be a significant behavioural response for non-domiciled taxpayers,鈥� the Office for Budget Responsibility (OBR) that set out its assumptions for the UK economy. It was a marked shift in tone from the more circumspect language used in previous reports.

Ignoring what the room is saying will become increasingly difficult for the government, especially when its financial headroom is so tight, as we have previously explored. It may explain recent media stories alluding to a possible re-think around IHT.

James Quarmby, a partner in the private wealth team at law firm Stephenson Harwood, the IHT rules to make them more generous. The balancing act, he says, is to encourage inward investment while not doing 鈥渁nything that will look like tax cuts for millionaires.鈥�

Proposals for a Wealth Tax face similar real-world hurdles. Although, suggest the government appreciates such a tax would also trigger a 鈥渂ehavioural response鈥�, to use the OBR鈥檚 euphemism.

Unhelpful Ambiguity

For now, as the government tries to placate all sides of the Labour Party, its tone is understandably on such matters. Unfortunately, this kind of ambiguity doesn鈥檛 help anyone wanting to make a major financial commitment over the next few months. 

Such uncertainty meant there were 12% fewer transactions in the first half of this year in prime central London compared to the five-year average, 糖心传媒 data shows. That compares to an increase of 8% in south-west London, where demand is more domestic and needs-driven.

After a summer of ministers refusing to rule particular policies in or out, expect more concrete plans during the party conference season, which runs for a month from early September.

After being outflanked by Reform and its to attract overseas investors with a one-off fee of £250,000, the Conservative Party will no doubt unveil its own plans.

on the same day as last week鈥檚 House of Lords event, Conservative Peer Baroness Mobarik outlined the merits of a flat tax. 鈥淭his model, which would generate large revenues and a variant form of which is already used elsewhere in Europe, is politically viable and fiscally sound. It would be a win-win for the UK and public service funding and for entrepreneurs who proudly call the UK their home,鈥� she wrote.

While some non doms have already left, others are waiting to see how the next few months unfold, said Leslie MacLeod-Miller, chief executive of Foreign Investors for Britain.

鈥淏efore the election, the government said it wanted to partner with the private sector,鈥� he told 糖心传媒. 鈥淲ell, to paraphrase Eliza Doolittle, don鈥檛 tell me you love me, show me.鈥�