Autumn statement 2022: Non-doms breathe easily for now

Speculation over changes

The UK tax position of non-UK domiciled individuals has seen significant changes over the past 15 years, with especially significant reforms taking place in 2008 and 2017. Since 2017 the rules have remained relatively stable and until recently the treatment of non-UK domiciled individuals appeared to have fallen down the political agenda.

Political considerations have meant that this has now changed, and the treatment of non-UK domiciled individuals has begun to receive much greater attention.

In particular, the Labour Party has stated an intention to ‘abolish non-dom status’, so there was some speculation ahead of the Autumn Statement that changes, or at least a review or consultation on changes, to the taxation of non-UK domiciled individuals might be proposed.

Non-UK domiciled individuals will welcome the fact that no mention was made of their particular status in the Chancellor’s speech, although the issue is expected to remain in the political limelight and there is no guarantee that changes will not be announced in the Budget scheduled for Spring 2023 or beyond.

For now, non-UK domiciled individuals can continue to take advantage of what is a generous tax regime by international standards. The Government will hope that this helps the UK to remain an attractive destination for inward investment, although no replacement has yet been announced for the investor visa scheme that was closed in early 2022.

Non-UK domiciled individuals may wish to review existing arrangements, as the Chancellor continues to tackle tax avoidance in relation to overseas matters. Recent cases have also underlined the importance of keeping domicile status under regular review, especially where specific reliefs are being relied upon.

Capital gains tax anti-avoidance measures

The Autumn Statement proposals did contain one technical change that is targeted specifically at non-UK domiciled individuals.

This is a measure designed to prevent use of the UK’s ‘share-for-share’ exchange provisions in a way that enables non-UK domiciled shareholders to realise gains or extract profits tax-free. The new rules will deem certain non-UK shareholdings acquired via a share-for-share exchange to be UK holdings for the purposes of capital gains tax and income tax. This means that gains realised on those holdings, or dividends received from them, will remain subject to UK tax and will not qualify for the remittance basis.

The provisions are targeted and only apply to holdings greater than 5% in ‘close’ companies, but the revenue that they are projected to raise suggests that the Government considers this a significant area of tax avoidance.