Lawyers have warned that many non-domiciled individuals will snub the UK if the government proceeds with changes to the way they are taxed.
The Treasury (pictured) began consulting in January on ensuring that non-doms commit to pay the so-called remittance basis charge (RBC) for a minimum of three years.
Non-doms opting to pay the RBC only pay UK tax on the income or gains brought into the UK. They lose certain tax-free allowances and pay the RBC, currently set at £30,000 annually, if they have been resident in the UK for at least seven of nine years, or £50,000 for UK residency of 12 of 14 years.
The tax committee of the Law Society responded to the consultation last week and warned any future government to be cautious about changing tax regulations.
‘Those on the cusp of whether it is worth paying the RBC will regard this as a further cost of being resident in the UK, on the back of the increases to the level of the RBC itself and the other tax charges they may now face,' the committee stated.
‘These clients are typically highly internationally mobile and may cease to become resident as a result. They may also tell their friends abroad not to come to the UK.’
The committee suggested a two-year limit would be more appropriate for the estimated 800 individuals who would be affected.
The response questioned whether there is currently a significant problem of individuals ‘working the system’ to avoid paying the RBC, and warned that the damage to the UK’s reputation could be ‘out of proportion’ to the small amounts of tax the reforms will raise.
The issue of non-doms has become a key battleground in the election, with Labour pledging to abolish the status altogether and the Conservatives defending their record of making sure individuals pay a fair amount.