The Government should beware of being too heavy handed in its proposed reforms of the taxation of non-UK domiciled individuals, according to the Chartered Institute of Taxation.
As well as the proposed £30,000 a year tax charge announced in the pre-Budget report for non-doms with assets and earnings overseas, the statement also made reference to extending certain anti-avoidance measures that do not currently affect non-doms, which might include offshore trusts and companies.
The danger, said the CIOT, is that more punitive tax measures would simply cause non-doms to relocate elsewhere, depriving the UK economy of an important source of wealth.
Spokesman John Barnett said: “While it may be tempting to seek to raise additional tax from non-doms in this way, it needs to be recognised that the non-dom population are, by definition, highly internationally mobile and in many cases can choose to invest in foreign rather than UK businesses and assets.”
He added: “There is a significant danger that non-doms will move their investments out of the UK and potentially even relocate altogether. The loss to the UK economy as a whole might be substantial. The City of London could be particularly affected, as could other specific sectors such as the international art market (which could easily relocate to New York or elsewhere).”
The CIOT added that changes to the CGT regime for non-doms would be of an entirely different magnitude to the proposed £30,000 a year charge, and should be subjected to a thorough study of the economic effects before being taken further.
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