Interest in the forthcoming UK general election, if not yet at fever pitch, is building. The most important issue is the state of the UK economy. Burdened with eye-watering levels of debt, its growth rate is, at best, sluggish. Reducing the debt in times of higher interest rates is vital. Any government facing this “perfect storm” will need to cut spending or increase taxation. The stark reality facing Britain is that both strategies are likely to be necessary.

Earlier in April, Labour’s shadow chancellor, the Rt Hon Rachel Reeves MP, made a speech designed to grab the headlines. It was intended to act as a counter to recent Conservative plans as set out in Chancellor Jeremy Hunt’s recent Budget. As always, Acquarius maintains a completely apolitical stance so whether she achieved this or not is beyond the scope of our commentary. Nevertheless, this does not mean we should not be preparing ourselves – our clients and their advisers – for any likely fallout resulting from the fast approaching election. 

‍

In order to understand what Labour said this week, let us remind ourselves of the Conservatives’ plans. They did rather “borrow” from Labour’s ideas on “non-doms” one of the hottest of political potatoes in British politics today. 

‍

After an intense period of speculation, in his most recent Budget speech, the Chancellor announced the scrapping of the remittance basis of taxation for non- doms.  He revealed a new regime to take effect in just a year’s time. This is generally much tighter and somewhat less generous than the arrangements it replaces. However, remaining tax planning opportunities include a new four-year exemption regime and the ability to use non-UK trusts during the first four years. Readers who would like to know more about the finer details should get in touch with me directly.

‍

Significantly, it is these exemptions (or “loopholes” as Ms. Reeves describes them) that she plans to eliminate. In her statement, she said she would raise £2.6bn by abolishing the Government’s exemptions. Significantly, non-doms would not be able to use family trusts in order to avoid inheritance tax. Ms. Reeves also plans to scrap non-doms’ entitlement to a 50% discount on tax in the first year of the new rules imposition.

She went on to announce a plan to recoup some £5bn from the “tax gap” defined as the difference between tax owed to HMRC and the amount collected. Most commentators predict a clamping down on tax evasion in all its forms.

‍

At Acquarius, we are not interested, nor involved, in any form of tax evasion so the second point, whilst interesting, is not directly relevant to our clients. However, planned rule changes affecting non-doms are hugely important. In April 2023, there were 68,800 non-doms living in the UK of which some 37,000 were claiming the special “remittance basis” tax status.  Many of them will have had plans in place for many years. It is vital that their advisers review these arrangements to ensure they will continue to prove effective should Labour plans come to fruition. For those non-doms without planning in place – or individuals planning to move to the UK in the next year – time is even more pressing.

‍

Readers may well ask why they should act now. After all, Labour’s plans are just that at present – plans. The terms are far from becoming law any day soon. It is reasonable, perhaps, to believe that time is on our hands. We have an election and its aftermath to come and there may be another budget before any of this comes to fruition. Meanwhile, “events” could de-rail everything. Global uncertainty abounds quite apart from deadly conflict in Europe and the Middle East.

‍

Nevertheless, despite the lack of any imminent changes, it would be seriously unwise not to prepare. At the very least, it is prudent to look at current structures and “future proof” them where possible. I will not go into detail here as each client’s situation differs. What they all have in common is a need to ensure protection from whatever scenario presents itself in less than a year from now. 

‍

Get in touch with me here at Acquarius or ask your regular adviser to do so. Together we can ensure that you are as prepared, as far as possible, for any nasty surprises these politicians may spring upon us.

‍

In the meantime, it does not take a psephologist (someone who studies elections) to realise Britain is just one of almost fifty countries going to the polls in 2024. This is shaping up to be a vital year for our immediate future. Interesting times indeed but do not – please do not – simply watch from the sidelines. The time to act is now.