Adviser.ca quotes Robert Reymond and Jonathan Rothwell on the abolition of the UK non-dom regime and options available for existing non-doms
Robert Reymond, Partner, and Jonathan Rothwell, Legal Director, in our Private Client team are interviewed by Adviser.ca, a Canadian based publication for financial advisors, on the abolition of the UK non-dom regime and what this means for Canadian non-doms based in the U.K.
According to a study from the London School of Economics, Canadians have traditionally been among the most prolific users of non-dom status.
Following the overhaul of the non-dom regime, new arrivals to the U.K. are expected to face a Foreign Income and Gains (FIG) regime beginning in April 2025 that will exempt them from tax on their foreign income and gains — whether remitted to the U.K. or not — for their first four years in the country. After that period, people who remain resident will be taxed on their worldwide assets, just like those currently domiciled in the U.K.
While the precise details of the new regime are still unclear and yet to be announced by the newly elected Labour government, Jonathan says that in the meantime, existing non doms may want to adjust how they realise foreign income and gains based on when they moved to the U.K.
People with less than four years in the country may wish to defer realising foreign gains until after April 2025, when the new rules would allow them to realise income and gains and remit them to the U.K. free of tax, assuming they qualify for the FIG regime.
Conversely, non doms with more than four years of U.K. residence may want to accelerate the realisation of foreign income and gains to benefit from the last days of the remittance basis of taxation. Then potentially deferring remittances until after April [20]25, when they can benefit from the temporary repatriation facility.
Robert adds that the reaction of his clients to the non-dom changes has been mixed.
He notes that tax treatment has dropped down the priority lists of even his wealthiest clients when choosing a country of residence.
They do look more closely now than they did previously at lifestyle and places where they want to spend time and live, and in some cases bring up their kids, depending on what stage of life they are at.
For more tax-focused clients, Switzerland and Italy are emerging as two of the most attractive alternatives to the U.K.
One place wealthy U.K. non doms are unlikely to seriously consider as an alternative destination is Canada, Robert adds, referencing the loss of the immigration trust regime.
The trusts, which could previously be used to provide newcomers with a five-year tax holiday from income and capital gains earned on their non-Canadian assets, were abolished as part of the 2014 budget and never replaced.
I have to describe to them that the highest tax rate depending on the province is 54.8%, and now the capital gains [inclusion] rate has just increased as well.
Read the full piece in Adviser.ca here.
