Reeves ‘flying blind’ on non-doms as ultra-rich couple move to Milan
Rachel Reeves will go into next month’s budget “flying blind” over the number of non-doms that have left the UK, a new report has warned on the day that a high-profile couple relocated to Milan in response to the Chancellor’s crackdown last autumn.
The study, which was compiled by former Treasury economist Chris Walker, found that at least 1,800 non-doms have relocated since the government ploughed ahead with plans to abolish the non-domicile status last year, 50 per cent more than last year’s Office for Budget Responsibility (OBR) predictions.
Its findings stand in sharp contrast to reports that emerged from the Treasury over the summer, which, citing HMRC payroll data, suggested fears wealthy foreigners had fled the UK in droves after the tax status was scrapped had been overstated.
Last week Reeves suggested the number of non-doms leaving the UK was in line with expectations and criticised “bleating” critics of the policy. She has since indicated that she will target the wealthy in next month’s Budget, saying those with “the broadest shoulders should pay their fair share of tax.”
The leak – first reported by the Financial Times – suggested a quarter of non-doms with trusts, known as remittance basis users, had left the UK in the wake of Reeves’ crackdown, in line with official forecasts.
But Walker’s study – published by economics consultancy Chamberlain Walker – said a significant proportion of the UK’s wealthiest non-doms pay themselves via investments and dividends or income from overseas, and would not show up in the payroll data.
“It is worrying that the Chancellor is heading into the Budget with so little understanding of the fiscal impact of the reform of non-dom status,” he said. “The Treasury is effectively flying blind about the behaviour of the most responsive group of non-doms, not knowing for sure who has left the UK so far and the significant tax revenue implications of those departures.”
More non-doms leaving Britain
The paper reflects a growing bank of anecdotal evidence showing some of the wealthiest non-doms have relocated to tax-friendly jurisdictions in the past year.
Steel magnate Lakshmi Mittal, Aston Villa co-owner Nassef Sawiris and Goldman Sachs’ Richard Gnodde have all left Britain since last October, either in favour of the UAE, which does not levy income tax or inheritance tax, or Italy, which offers wealthy foreigners a €200,000 (£173,740) – soon to be 300,000 – flat tax to stay out of the country’s general tax codes..
CityAM can reveal that they have now been joined by the centimillionaire Mulholland family, who left the UK on Monday. Dr Stephen Mulholland – a plastic surgeon – and his tech entrepreneur wife Ann moved to Milan, claiming the new treatment of foreign-held trusts left them unable to stay in Britain and foreign income and gains.
Part of Reeves’ crackdown ensured that assets held in trusts based overseas would be liable to inheritance tax. This was a departure from the Conservatives’ pre-election promise to abolish the non-dom regime, which chose to keep the inheritance tax carve-out.
In an interview with CityAM Studios, Ann Mulholland said: “We do not want to pay taxes on our worldwide income. We’re fine paying here – buying properties et cetera. We’re happy to employ. We’re happy to give to England. We’re happy to invest.
“We’d be happy to stay, if ‘Reckless Reeves’ would allow us to pay €235,000 [including spouse fee] like we have to in Italy. And then allow us to invest in England and make a declaration investment. That would make more sense than driving people out.”