SCRAPPING UK non-dom tax breaks is unlikely to lead to more high-net-worth individuals moving to Jersey, the External Relations Minister has said.
Deputy Ian Gorst said the changes announced by Chancellor Jeremy Hunt this week could make some “non-doms” reconsider where they chose to live and invest.
Non-dom status allowed foreign nationals who lived in the UK, but were officially domiciled abroad, to avoid paying UK tax on their overseas income or capital gains.
Deputy Gorst added that previous tax changes had generated an uptick of interest in Jersey and the other Crown Dependencies.
However, he stressed that this would not affect the operation of the Island’s 2(1)e high-value residency policy, which he said only targeted a limited number of individuals each year, although he acknowledged that the numbers applying might increase.
The current UK regime will be replaced with new rules from April 2025 so that those with the “broadest shoulders” pay more, Mr Hunt announced in his Budget speech.
From 2025, new arrivals to the UK will not pay any tax on foreign income and gains for their first four years of residency, but those who continue to live in Britain after that will pay the same tax as other UK residents.
John Shenton, tax director at Grant Thornton, said the move may lead to “an immediate and significant restructuring of CI trusts and companies” which do business with non-dom individuals.
Mr Shenton said: “There is a lot for the islands to think about and they need to be prepared for all outcomes and not simply have tunnel vision.
“They will not pay tax on non-resident trust distributions either. They will pay tax on UK income and gains, as is the case for non-domiciled individuals now. This may lead to an immediate and significant restructuring of CI trusts and companies.”
Describing the new rules as “detailed and complex”, Mr Shenton said it was not a case of business as usual, and that any structures which relied upon an individual being a non-dom UK resident should be reviewed.
However, he added that the changes also brought opportunities for the Channel Islands to attract new business and highly skilled labour.
But he also warned about the potential consequences of business being driven away from London – and by proxy Jersey – by adverse consequences of the new tax regime.
“It could be a poisonous apple if the changes spread the current UK non-dom market far and wide,” he said.
