By Benjamin Stupples and Tom Rees. Read the full article here on bloomberg.com
Contributed to by Simon Goldring, International Private Wealth and Tax Lawyer at Excello Law
Simon Goldring, an private wealth and tax lawyer at Excello Law, was invited to contribute to this thought-provoking Bloomberg article, which delves into the potential implications of scrapping preferential tax treatment for ‘non-dom’ foreigners in the UK.
Britain’s Elite on Edge as Keir Starmer Gains Political Ground
Keir Starmer, the leader of the UK Labour Party, has strategically distanced himself from the policies of his left-wing predecessor, Jeremy Corbyn. However, despite this shift, there is a growing sense of unease among Britain’s super-rich regarding his potential leadership of the country.
With a general election scheduled for January 2025 and Labour currently enjoying a favorable position in the polls, the political landscape is of paramount concern for the nation’s wealthy individuals and families. Goldring, along with about a dozen other lawyers, tax advisers, and money managers, has had insights into their apprehensions.
Many among this elite group are contemplating strategies to distance themselves from the UK if Keir Starmer secures the keys to 10 Downing Street and follows through on his plans to eliminate preferential tax treatment for “non-doms.” These ‘non-doms’ are affluent UK residents whose permanent homes are considered to be abroad.
Simon Goldring, based in Dubai, shared his observations, revealing that a significant number of his clients have voiced their intention to leave the UK should there be a change in government. He recounted that during the 2019 election, three of his clients left Britain on the morning of the vote, returning only when it became evident that Corbyn had lost.
At that time, Corbyn’s policies were perceived as a threat to the wealth of the nation’s elite. He advocated for a range of measures, including the nationalization of companies, increased income taxes for those earning over £80,000 ($98,000) annually, and stricter regulations on tax avoidance. The tax breaks enjoyed by ‘non-doms’ and private education were also targets in his crosshairs.
However, since Starmer’s ascent to leadership following Labour’s worst electoral defeat since 1935, he has actively worked to distance himself from Corbyn’s legacy. He ousted his predecessor from the parliamentary party, abandoned the mass-nationalization promise, and cultivated stronger relationships with businesses. His efforts have been so successful that even the CEO of Currys Plc, Alex Baldock, recently remarked that “everyone in London who wears a tie has had breakfast with Rachel Reeves,” the Shadow Chancellor of the Exchequer.
Starmer’s message to the business community is clear: “If we do come into government, you will be coming into government with us.” Nevertheless, many among Britain’s top 1% are experiencing a sense of ambivalence. While Starmer and his team are appealing to businesses, the wealthy elite are exploring potential exit strategies, often leading them to low-tax destinations in Europe and the Middle East.
The Labour Party, as of now, has not responded to requests for comments on this matter.
This apprehension extends beyond foreign nationals. One ultra-high-net-worth UK investor, who preferred to remain anonymous, informed Bloomberg that they are seeking advice on how to spend more time abroad without fully relocating.
Despite Labour’s disavowal of wealth taxes and increased levies on income and capital gains, Starmer and Reeves have indicated that the affluent may experience reduced benefits under a Labour government. Their proposals include closing tax loopholes for private equity partners and ending the exemption of value-added tax on private school fees. However, it is their plan to scrap the UK’s ‘non-dom’ regime that is causing the most alarm among the wealthy elite.
Currently, non-domiciled residents, spanning from multi-billionaires to middle-ranking bankers working abroad, enjoy up to 15 years of tax-free status on their overseas earnings under the current program. They can initially claim this status without incurring extra charges, but they may eventually face annual costs of up to £60,000 if they continue to reside in the UK. Labour leaders estimate that scrapping this program could generate approximately £3 billion in revenue, though the specifics of the replacement system are yet to be fully disclosed.
Piers Barclay, a partner at the London-based law firm Macfarlanes, highlights the prominence of this issue among his clients, stating that it is discussed “95% of the time.” The ‘non-dom’ regime, with its origins dating back to 1799, was initially established to safeguard colonial investments and has survived two significant reforms in the past two decades. Supporters argue that the system attracts entrepreneurs who create businesses and jobs. However, the status is now under scrutiny, particularly in light of the economic challenges faced by ordinary Britons.
Rachel Reeves, the Shadow Chancellor of the Exchequer, asserts that the tax break is outdated and that the funds saved by eliminating it could be redirected toward healthcare and education.
