Rachel Reeves warned non-dom crackdown could land Labour with £1 BILLION bill
Rachel Reeves, Keir Starmer and Angela Rayner in the Commons earlier today
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Labour has been warned their non-dom crackdown could end up costing the Government as much as £1billion.
According to research by Oxford Economics, the Government’s plans to raise billions by overhauling the controversial regime could backfire with wealthy foreigners fleeing the country to escape higher taxes.
Currently, non-doms can avoid paying tax on overseas income and gains for up to 15 years.
However, from April 2025, this system will be scrapped and replaced by a less generous residence-based regime that only allows wealthy foreigners to claim a tax break for four years.
Rachel Reeves, Keir Starmer and Angela Rayner in the Commons earlier today
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It was originally forecast by the Office for Budget Responsibility that scrapping the tax break could raise around £3billion a year.
However, the watchdog admitted that this estimate was highly uncertain because it was difficult to predict how non-doms would respond to the proposals.
Oxford Economics has forecast based on results from a survey that the non-dom population could fall by 32 per cent as a result of the reforms, reports The Telegraph.
Experts said the Government had “rushed forward” with the non-dom proposals despite limited research on their potential impact.
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Chancellor Rachel Reeves has suggested tax rises may still be neededPOOLChris Etherington, of accountancy firm RSM, said: “Rather than fixing the foundations, the Chancellor could find her financial forecasts are built on sand if we see large numbers of non-doms leaving the UK.
“The proposals to change the rules for non-doms have arguably been driven more by politics than economics, as there has only been limited research undertaken on the impact in the past.
“The Government is naturally keen to deliver on its manifesto commitments but they have rushed forward with no real understanding of how non-doms will respond.”
Research has found that 63 per cent of the non-doms surveyed were planning on leaving the UK within two years or actively considering leaving shortly. Those surveyed had a total of £8.4billion invested in the UK economy, working out at an average of £118millio per person.
Chancellor of the Exchequer Rachel Reeves
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Nimesh Shah, of accountancy firm Blick Rothenberg, said: “Given the recent dark picture painted by the Prime Minister and Chancellor, it has set even more hares running that taxes are about to exponentially increase, which is also leading UK entrepreneurs to consider their future in the UK.”
An HM Treasury spokesman told The Times: “We are committed to addressing unfairness in the tax system.
“That’s why we are removing the outdated non-dom tax regime and replacing it with a new, internationally competitive, residence-based regime focused on attracting the best talent and investment to the UK.”