Non-doms urged to ‘get out while they can’ before tax crackdown

Wealthy foreigners are being urged to “get out while they still can” after Labour announced plans to toughen up a Tory crackdown on non-doms.

Labour is attempting to plug a funding gap ahead of the general election after Jeremy Hunt’s surprise decision to abolish non- dom status in his Budget last month, effectively spending the money Labour had earmarked for health and education policies.

Rachel Reeves, the shadow chancellor, said the party will close a loophole that gives non-doms – who live in Britain but avoid paying UK tax on money they make overseas – until April next year to put overseas funds into a trust.

These funds will be exempt from inheritance tax under government plans. Labour said it would raise £ 430m a year by removing the exemption.

However, high- end tax and wealth advisers warned the raid will be “devastating” for rich foreigners, forcing them to flee abroad and take their wealth with them.

Jon Elphick, international tax adviser at Mark Davies & Associates, said Labour’s plans would be a “dealbreaker” for non- doms considering leaving Britain. He added: “Tax perks [for wealthy foreign clients] have been eroded over 10 or 20 years. The latest measures are devastating for these people, it’s a fundamental change.

“This will be a deal-maker for moving abroad, especially ultra-high net worth clients who would be paying a lot of tax. There’s now a big risk they relocate.”

Three in 10 people who earn £5m or more claim non-dom status, compared with fewer than three in 1,000 among those earning less than £100,000.

The Office for Budget Responsibility, the official forecaster, expects 10pc to 20pc of non- doms to leave the UK because of the tax raid, but in reality that figure could be even higher.

Mr Elphick added: “One Israeli client last week said they had had enough of how the tax system had changed and as a result will move, probably to Monaco, Switzerland or Dubai.”

Unlike UK-domiciled residents, individuals who live in Britain but have a permanent home elsewhere can avoid paying tax on foreign income and gains. Simon Goldring, of Excello Law, said: “My clients are not happy. You’re faced with a stark choice: stay in the UK and get taxed, or leave. It’s a case of get out while you still can.”