Latest news with #taxregime
Sky News
3 days ago
- Business
- Sky News
Rachel Reeves said this flagship policy would raise money - it may end up doing the opposite
What do we do about the non-doms? It's a question more than a handful of people have been asking themselves at the Treasury lately. It had seemed simple enough. In her first budget as chancellor, Rachel Reeves promised a crackdown on the non-dom regime, which for the past 200 years has allowed residents to declare they are permanently domiciled in another country for tax purposes. Under the scheme, non-doms, some of the richest people in the country, were not taxed on their foreign incomes. Then that all changed. Standing at the despatch box in October last year, the chancellor said: "I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025." The hope was that the move would raise £3.8bn for the public purse. However, there are signs that the non-doms are leaving in such great numbers that the policy could end up costing the UK investment, jobs and, of course, the tax that the non-doms already pay on their UK earnings. If the numbers don't add up, this tax-raising policy could morph into an act of self-harm. With the budget already under strain, a poor calculation would be costly financially. The alternative, a U-turn, could be expensive for other reasons, eroding faith in a chancellor who has already been on a turbulent ride. So, how worried should she be? The data on the number of non-doms in the country is published with a considerable lag. So, it will be a while before we know the full impact of this policy. However, there is much uncertainty about how this group will behave. While the Office for Budget Responsibility forecast that the policy could generate £3.8bn for the government over the next five years, assuming between 12 and 25% of them leave, it admitted it lacked confidence in those numbers. Worryingly for ministers, there are signs, especially in London, that the exodus could be greater. Property sales Analysis from the property company LonRes, shows there were 35.8% fewer transactions in May for properties in London's most exclusive postcodes compared with a year earlier and 33.5% fewer than the pre-pandemic average. Estate agents blame falling demand from non-dom buyers. This comes as no surprise to Magda Wierzycka, a South African billionaire businesswoman, who runs an investment fund in London. She herself is threatening to leave the UK unless the government waters down its plans. "Non-doms are leaving, as we speak, and the problem with numbers is that the consequences will only become known in the next 12 to 18 months," she said. "But I have absolutely no doubt, based on people I know who have already left, that the consequences would be quite significant. "It's not just about the people who are leaving that everyone is focusing on. It's also about the people who are not coming, people who would have come, set up businesses, created jobs, they're not coming. They take one look at what has happened here, and they're not coming." Lack of options for non-doms But where will they go? Britain was unusual in offering such an attractive regime. Bar a few notable exceptions, such as Italy, most countries run residency-based tax systems, meaning people pay tax to the country in which they live. This approach meant many non-doms escaped paying tax on their foreign income altogether because they didn't live in those countries where they earned their foreign income. In any case, widespread double taxation treaties mean people are generally not taxed twice, although they may have to pay the difference. In one important sense, Magda is right. It could take a while before the consequences are fully known. There are few firm data points for us to draw conclusions from right now, but the past could be illustrative. 3:06 The non-dom regime has been through repeated reform. George Osborne changed the system back in 2017 to limit it to just 15 years. Then Jeremy Hunt announced the Tories would abolish the regime altogether in one of his final budgets. Following the 2017 reforms there was an initial shock, but the numbers stabilised, falling just 5% after a few years. The data suggests there was an initial exodus of people who were probably considering leaving anyway, but those who remained - and then arrived - were intent on staying in the UK. So, should the government look through the numbers and hold its nerve? Not necessarily. Have Labour crossed a red line? Stuart Adam, a senior economist at the Institute for Fiscal Studies, said the response could be far greater this time because of some key changes under Labour. The government will no longer allow non-doms to protect money held in trusts, so 40% inheritance tax will be due on their estates. For many, that is a red line. 1:57 Mr Adam said: "The 2017 reform deliberately built in what you might call a loophole, a way to avoid paying a lot more tax through the use of existing offshore trusts. That was a route deliberately left open to enable many people to avoid the tax. "So it's not then surprising that they didn't up sticks and leave. Part of the reform that was announced last year was actually not having that kind of gap in the system to enable people to avoid the tax using trusts, and therefore you might expect to see a bigger response to the kind of reforms we've seen announced now, but it also means we don't have very much idea about how big a response to expect."
Sky News
3 days ago
- Business
- Sky News
Why Rachel Reeves may want to rethink one of her pivotal policies
What do we do about the non-doms? It's a question more than a handful of people have been asking themselves at the Treasury lately. It had seemed simple enough. In her first budget as chancellor, Rachel Reeves promised a crackdown on the non-dom regime, which for the past 200 years has allowed residents to declare they are permanently domiciled in another country for tax purposes. Under the scheme, non-doms, some of the richest people in the country, were not taxed on their foreign incomes. Then that all changed. Standing at the despatch box in October last year, the chancellor said: "I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025." The hope was that the move would raise £3.8bn for the public purse. However, there are signs that the non-doms are leaving in such great numbers that the policy could end up costing the UK investment, jobs and, of course, the tax that the non-doms already pay on their UK earnings. If the numbers don't add up, this tax-raising policy could morph into an act of self-harm. With the budget already under strain, a poor calculation would be costly financially. The alternative, a U-turn, could be expensive for other reasons, eroding faith in a chancellor who has already been on a turbulent ride. So, how worried should she be? The data on the number of non-doms in the country is published with a considerable lag. So, it will be a while before we know the full impact of this policy. However, there is much uncertainty about how this group will behave. While the Office for Budget Responsibility forecast that the policy could generate £3.8bn for the government over the next five years, assuming between 12 and 25% of them leave, it admitted it lacked confidence in those numbers. Worryingly for ministers, there are signs, especially in London, that the exodus could be greater. Property sales Analysis from the property company LonRes, shows there were 35.8% fewer transactions in May for properties in London's most exclusive postcodes compared with a year earlier and 33.5% fewer than the pre-pandemic average. Estate agents blame falling demand from non-dom buyers. This comes as no surprise to Magda Wierzycka, a South African billionaire businesswoman, who runs an investment fund in London. She herself is threatening to leave the UK unless the government waters down its plans. "Non-doms are leaving, as we speak, and the problem with numbers is that the consequences will only become known in the next 12 to 18 months," she said. "But I have absolutely no doubt, based on people I know who have already left, that the consequences would be quite significant. "It's not just about the people who are leaving that everyone is focusing on. It's also about the people who are not coming, people who would have come, set up businesses, created jobs, they're not coming. They take one look at what has happened here, and they're not coming." Lack of options for non-doms But where will they go? Britain was unusual in offering such an attractive regime. Bar a few notable exceptions, such as Italy, most countries run residency-based tax systems, meaning people pay tax to the country in which they live. This approach meant many non-doms escaped paying tax on their foreign income altogether because they didn't live in those countries where they earned their foreign income. In any case, widespread double taxation treaties mean people are generally not taxed twice, although they may have to pay the difference. In one important sense, Magda is right. It could take a while before the consequences are fully known. There are few firm data points for us to draw conclusions from right now, but the past could be illustrative. 3:06 The non-dom regime has been through repeated reform. George Osborne changed the system back in 2017 to limit it to just 15 years. Then Jeremy Hunt announced the Tories would abolish the regime altogether in one of his final budgets. Following the 2017 reforms there was an initial shock, but the numbers stabilised, falling just 5% after a few years. The data suggests there was an initial exodus of people who were probably considering leaving anyway, but those who remained - and then arrived - were intent on staying in the UK. So, should the government look through the numbers and hold its nerve? Not necessarily. Have Labour crossed a red line? Stuart Adam, a senior economist at the Institute for Fiscal Studies, said the response could be far greater this time because of some key changes under Labour. The government will no longer allow non-doms to protect money held in trusts, so 40% inheritance tax will be due on their estates. For many, that is a red line. 1:57 Mr Adam said: "The 2017 reform deliberately built in what you might call a loophole, a way to avoid paying a lot more tax through the use of existing offshore trusts. That was a route deliberately left open to enable many people to avoid the tax. "So it's not then surprising that they didn't up sticks and leave. Part of the reform that was announced last year was actually not having that kind of gap in the system to enable people to avoid the tax using trusts, and therefore you might expect to see a bigger response to the kind of reforms we've seen announced now, but it also means we don't have very much idea about how big a response to expect." With the public finances under considerable pressure, that will offer little comfort to a chancellor who is operating on the finest of margins.
Forbes
12-07-2025
- Politics
- Forbes
Bombshell: Denaturalized Citizen Forced To Exit, Can't Escape Exit Tax
The Trump administration is ramping up efforts to revoke the citizenship of naturalized Americans. ... More Can those stripped of their U.S. citizenship be subject to the U.S. tax expatriation rules even though they are not voluntarily giving up U.S. citizenship? It seems so. In the heart of America's immigration debate, a lesser-known but seismic issue is emerging. The intersection of denaturalization and the expatriation tax regime is an explosive topic that has not yet been explored. If the expatriation regime applies to a denaturalized citizen, it imposes an exit tax through a deemed sale of worldwide assets as well as a transfer tax (current 40% rate) on gifts or inheritances received by U.S. individuals from the former citizen. As the Trump administration ramps up efforts to revoke the citizenship of naturalized Americans, especially those accused of fraud or misrepresentation in their naturalization applications, a critical question comes to the fore. Can those stripped of their U.S. citizenship be subject to the U.S. tax expatriation rules even though they are not voluntarily giving up U.S. citizenship? If so, can they argue their U.S. citizenship was void from the outset, meaning they were never a citizen to begin with, thereby escaping the potentially crippling tax consequences? Naturalized Americans Stripped Of U.S. Citizenship This issue is steeped in legal complexity, and it has been heightened by recent policy shifts. It could have profound implications for vulnerable naturalized citizens who are high-net-worth individuals. It has recently been reported that the U.S. Department of Justice under directives from President Donald Trump and Attorney General Pam Bondi, is aggressively pursuing denaturalization cases as part of a broader immigration enforcement agenda. The DOJ's June 11, 2025 memorandum instructs its Civil Division to 'prioritize and maximally pursue denaturalization proceedings' against naturalized citizens who obtained citizenship through fraud, misrepresentation, or who pose national security threats, such as those with ties to terrorism or serious criminal offenses. This policy shift has sent shockwaves through immigrant communities comprised of over 25 million naturalized citizens. High-profile cases, such as that of Elliott Duke, a U.K.-born military veteran denaturalized in June 2025 for crimes committed before naturalization, highlight the real-world stakes. Duke, now stateless after renouncing British citizenship, faces not only the loss of U.S. rights but also potential tax liabilities under the U.S. expatriation tax regime. Rubbing Salt In The Wound: Expatriation Tax Regime The current expatriation regime is embodied in IRC Section 877A, enacted in 2008 to deter wealthy Americans from renouncing citizenship to avoid taxes. The law imposes an 'exit tax' on 'covered expatriates' which includes U.S. citizens or long term residents who relinquish citizenship or green cards, respectively, and meet any one three criteria: (1) having an average annual net income tax liability above a threshold ($206,000 for 2025, adjusted for inflation), (2) having a net worth of $2 million or more, or (3) failing to certify tax compliance for the five years preceding expatriation. The tax operates as a mark-to-market regime, treating the individual as if he has sold all worldwide assets at fair market value the day before expatriation. Gain exceeding a certain exclusion amount is subject to income tax. Another provision of the expatriation tax regime is a separate transfer tax under Code Section 2801 imposing a 40% tax on U.S. citizens or residents who receive gifts or bequests from a covered expatriate. This provision complements the Section 877A exit tax by targeting wealth transfers occurring any time in the future after expatriation. Involuntarily Denaturalization And the Expatriation Tax Regime Can the expatriation tax regime apply to an individual who was denaturalized involuntarily through a court order? Apparently, this seems so. Crucially, the tax law defines the expatriation date for various classes of cases, such as those who renounce U.S. citizenship, or give up long term residency. A special provision defines the expatriation date for denaturalized citizens as 'the date a court cancels a certificate of naturalization.' This explicitly includes involuntary loss of citizenship, meaning denaturalized individuals are subject to the exit tax if they meet the covered expatriate criteria. For high-net-worth individuals, the expatriation tax regime can result in hefty exit tax liability even though citizenship is stripped against their will. The Ab Initio Argument: A Legal Long Shot For Those Whose Citizenship Is Revoked A tantalizing defense for denaturalized citizens is to argue that their citizenship was void ab initio—from the beginning—due to fraud or misrepresentation in the naturalization process. If they were never legally a U.S. citizen, the argument goes, they cannot be an 'expatriate' under Section 877A(g)(2)(A), which applies to 'any United States citizen who relinquishes his citizenship.' Could this argument exempt them from the exit tax, sparing them significant financial consequences? From an immigration perspective, the ab initio argument has merit. The United States Supreme Court in Johannessen v. United States, 225 U.S. 227, 228 (1912) held that denaturalization renders citizenship void, as if it never existed, because it was procured unlawfully. The tax law, however, operates differently from the immigration laws. We have seen this, for example, in the case of expired green cards. Simply because the individual no longer has the right to permanently reside in the United States upon expiration of the card, does not mean he is no longer liable for U.S. income taxes. The green card must be relinquished according to specific procedures to escape U.S. tax liability. Similarly, it appears, a naturalized citizen who has enjoyed citizenship benefits would be considered a citizen for tax purposes up until the court-ordered revocation date as specified in the expatriation tax regime rules. Allowing the ab initio argument to exempt denaturalized citizens from the exit tax could create a loophole, enabling those who fraudulently obtained citizenship to evade taxes. Given the right set of facts, however, a looming legal battle and challenge to application of the expatriation tax regime in such a case may be ahead. Green Card Holders Must Be Extremely Cautious The Trump administration's broader immigration crackdown, including policies targeting green card holders for alleged support of terrorism or criminal activity, carries the same tax risks. When the green card of a long term resident is revoked (or voluntarily relinquished), this is an 'expatriation' for tax purposes. The individual is treated the same as a U.S. citizen who gives up citizenship. The harsh U.S. tax consequences can apply if the individual meets any one of the tests for being a 'covered expatriate.' Navigating Risks: Practical Advice For naturalized citizens and long term residents, particularly those with significant wealth, the risks of denaturalization or green card revocation and the expatriation tax regime demand proactive measures. Ensuring complete accuracy in immigration applications is the first step. If a denaturalization or revocation case arises, get proper U.S. international tax help to examine the expatriation tax issues. Planning is paramount to minimize the risks and tax hit. This entire area is highly fluid and unpredictable. As such, it is critical for those with a stake to closely monitor ongoing events. Legal, political, and regulatory shifts can occur rapidly, with life-changing implications. Staying informed is essential. Stay on top of tax matters around the globe. Reach me at vljeker@ Visit my US tax blog
Yahoo
24-06-2025
- Business
- Yahoo
UK forecast to suffer world's biggest exodus of millionaires in 2025
Britain is on course to lose more millionaires than any other country in the word this year as the wealth exodus picks up pace, it was claimed today. The annual Wealth Migration Report from Henley & Partners, a firm that advises affluent clients considering relocating, said high tax rates, particularly the abolition of the non dom regime, combined with sluggish economic growth were the biggest factors driving rich people away. Henley & Partners estimate that 16,500 dollar millionaires - many from London - will quit the UK this year, putting it at the head of the global league table for the first time. That is more than double the 7,800 forecast to leave second-placed China, which previously topped the leader board for a decade. Last year's study estimated the UK would lose 9,500 people with at least $1 million in investable wealth in 2024. The United Arab Emirates is expected to see the biggest influx of millionaires with 9,800 overall in 2025, followed by the USA and Italy with 7,500 and 3,600 respectively. Henley & Partners chief executive Dr Juerg Steffen said:'For the first time in a decade of tracking, a European country leads the world in millionaire outflows. 'This isn't just about changes to the tax regime. It reflects a deepening perception among the wealthy that greater opportunity, freedom, and stability lie elsewhere. The long-term implications for Europe and the UK's economic competitiveness and investment appeal are significant.' The outflow accelerated last year when Rachel Reeves confirmed the abolition of non dom regime that allowed wealthy foreigners to live in the UK without having to pay tax on their overseas income and assets. There was particular alarm that some overseas assets would become liable for Britain's 40% inheritance tax (IHT) for the first time. The Treasury is now reportedly looking at a possible U-turn on some of the more punitive aspects of the policy, including a reversal over IHT in order to stem the flow. Reform Party leader Nigel Farage has also unveiled this week his own suggested scheme under which wealthy foreigner would be charged £250,000 for the right to be tax resident in the UK for a decade without their foreign assets being subject to UK tax. Proceeds would be paid directly into the bank accounts of the 2.5m lowest-paid working British people. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
The Guardian
22-06-2025
- Business
- The Guardian
Reform unveils plan to top up poorest workers from £250,000 fee on rich UK newcomers
Reform UK are to offer wealthy foreigners and returning British expats a bespoke tax regime in exchange for a one-off payment of £250,000 with all funds collected redistributed, the party claims, to Britain's lowest-paid workers. The proposal, dubbed the Britannia Card, is due to be unveiled by party leader Nigel Farage later this week. It promises a 10-year residence permit and a return to the controversial 'remittance basis' of taxation, allowing cardholders to shield overseas income from UK tax and avoid inheritance tax entirely. In return, high-net-worth applicants would pay an upfront 'entry contribution' of £250,000, which Reform UK said will be distributed in full to the bottom 10% of UK earners. Reform estimates this 'Britannia workers' dividend' could provide a tax-free annual payout of £600-£1,000 to roughly 2.5 million low-paid full-time workers, depending on uptake. The money would be delivered directly by HMRC at the end of each tax year. Under the plan, foreign nationals and wealthy British returnees would gain access to the UK through a tax-light regime that exempts all overseas income and assets from UK taxation for a decade. Inheritance tax is also scrapped entirely. In effect, Reform is proposing to sell exemption from the UK tax system – reinstating the abolished non-dom privileges in a simplified form but with a cash price attached. The party insists the fee is not a 'golden visa' but a way of ensuring wealthy newcomers 'immediately contribute to British society'. Unlike Labour's 2024 abolition of non-dom status, the main change the former Tory chancellor Jeremy Hunt pointed to in his last budget, which placed all new arrivals onto a residence-based tax system, Reform's approach would reintroduce tax advantages for the globally mobile – while simultaneously claiming to deliver for the British working class. Critics are likely to seize on what amounts to a structural loophole: the ability for millionaires to buy their way out of full UK tax liability, while ordinary residents remain subject to standard tax rules. Reform claims the policy will channel billions directly into the bank accounts of Britain's poorest workers. Under its lowest-uptake scenario (6,000 Britannia Cards issued a year), the scheme would generate £1.5bn – enough to fund a £600 tax-free bonus to 2.5 million workers. A high-uptake scenario (10,000 cards) would raise £2.5bn, delivering £1,000 per worker. Only full-time workers in the bottom 10% of the income distribution would qualify, with payments issued automatically via HMRC. Reform said the boost would disproportionately benefit workers in Wales, Scotland and the north-east of England – regions where a greater share of jobs sit in the bottom pay decile. The party has yet to publish a clear threshold for who qualifies as a 'high-net-worth newcomer' nor how the policy would be enforced or integrated into HMRC's current tax framework. No legislative draft has been released. Since sweeping to power in more than 670 council seats in May and taking control of 10 councils and two mayoralties, Reform has emerged as a serious national contender. The party now leads in multiple polls: a recent Sky/YouGov tracker shows Reform on 34%, with Labour trailing at 25% and the Conservatives at just 15%. The move is part of Farage's latest attempt to position Reform as the party of working people, not through traditional wage policies or trade unionism, but via direct wealth transfers and blunt fiscal symbolism. The Britannia Card is his clearest move yet to dominate the 'red wall' on economic terms. However the policy is likely to raise questions over who would be eligible with no confirmed income or asset threshold for applicants. It is also unclear whether HMRC could legally define and enforce the £250,000 fee. There are also concerns over it creating a two-tier tax system with British workers still paying full tax on global income while wealthy newcomers will not, and that it consists of a one-off fee and is not a recurring tax yet grants up to 10 years of preferential status. A Reform spokesperson said: 'We are serious about repairing the social contract. It's time workers feel the benefit of high-net-worth individuals entering the country. 'We are taking policy formulation very serious internally, as can be seen by today's announcement.' Responding to the trail of Reform's non-dom policy, a Labour spokesperson said: 'Nigel Farage can brand this whatever he wants - the reality is his first proper policy is a golden ticket for foreign billionaires to avoid the tax they owe in this country. 'As ever with Reform, the devil is in the detail. This giveaway would reduce revenues raised from the rich that would have to be made up elsewhere - through tax hikes on working families or through Farage's promise to charge them to use the NHS.'
