What the 4 July General Election may mean for non-dom reform

I am a lawyer and not a political pundit. So I don’t pretend to have any great insight into what the snap General Election may mean for non-dom reform.

However, as I have been fairly actively involved in the ongoing discussions, it felt only fair to nail my own colours to the mast. So, the following is simply to put something in writing – if only so that I can later be proved wrong. Please treat it as such and not as any form of insider-gossip (it isn’t the latter and I’m not the former). I should also note that it is a personal view and does not reflect either the CIOT’s or Burges Salmon’s views.

1. We now get a period of ‘sensitivity’ (formerly known as purdah). HMRC’s ‘listening events’ have been pulled. Arguably this wasn’t strictly necessary (provided they just listen and don’t say anything, which seems to have been the case so far). But HMRC will have lots of other things to do, so would probably welcome the opportunity to ditch what seems to have been a fairly futile exercise.
2. The opposition parties now get additional access to HMRC – so that they can cost manifesto-pledges, etc. I can’t remember the detail. But when it comes to non-dom reform, there is a lot of data which Labour hasn’t had until now and which will inform better policy.
3. I would expect non-doms to feature heavily in Labour’s election campaign. They will often be asked how they will pay for things – and non-dom reform is (in their view) a big part of the answer to this. Whether or not the numbers are accurate, expect to hear plenty of times that the government’s reforms are a missed opportunity and that there is another £Xbn+ that can be raised by Labour’s version.
4. All the evidence from the 2015 election is that non-doms were the only issue on which Ed Miliband got a better rating than David Cameron. So don’t expect Labour to be shy of mentioning non-doms on the campaign trail.
5. If the Conservatives win the election, I would expect an Autumn Budget and legislation in the Autumn. The following assumes (along with the opinion polls) that the Conservatives don’t.
6. If Labour win, I would expect an Emergency Budget within a few weeks (perhaps a month) of the election, although Rachel Reeves appears now to have ruled that out. (By comparison in 2010, the election was on 6 May and the Emergency Budget on 22 June.) But non-dom reform is unlikely to feature in it: the legislation and the detail simply won’t be ready.
7. Some are suggesting that Labour will delay past April 2025. I think this is unlikely. The policy is sufficiently developed that they have time to implement something by April 2025. And given points 3 and 4 above, I sense that a Labour government will want to progress quickly.
8. I would therefore expect draft legislation in a (late) Autumn Statement and a Finance Bill in the Spring.
9. This may well mean that we do not have an Act of Parliament until after April 2025 – so the start date may be before the legislation is on the books. This may seem wrong, but it has been something of the norm for a lot of the last decade. It is perfectly possible for the final detail of the legislation to post-date its commencement.
10. One positive (if the above is right) is that we will probably get better thought-through and drafted legislation than had we had an October/November election. (That might well have seen some less well drafted legislation rushed through ahead of the election.)
11. But (if the above is right) it does give less time to implement any planning ahead of April 2025.
12. That said, however – and I have said this already for some time – the overall shape of this has been clear for some time. Labour and Conservatives agree on about 90–95% of the shape of the reform (abolition of domicile as a territorial basis; abolition of remittance basis; four years for income tax and CGT; ten years for IHT; ten year tail; a Temporary Repatriation Facility (TRF); CGT rebasing). So those affected should not continue to delay while waiting for final legislation: by then it will almost certainly be too late. In most cases, we already know enough to start planning sensibly.
13. Obviously, the main difference between the parties is on IHT and trusts. Here my sense is that Labour have been clear (much as many may consider it misguided) that there is not going to be grandfathering for existing trusts.
14. I would, however, expect that Labour, once in power, won’t be so hedged in by the needs of electoral politics. (The latter – and getting it past the OBR – has been one of the reasons why some aspects of the current government proposals (particularly the four year cliff-edge) look insufficiently thought through.)
15. So, I would hope that Labour may be persuaded to make some (potentially positive) tweaks if and when they have the resources of the Treasury to assist them. This might include:

• a phased entry after four years, rather than a cliff-edge;
• (as already trailed) better reliefs (for UK income and gains) during the first four years;
• some additional encouragement under the TRF (although noting that encouragement can involve sticks as well as carrots).

16. Some of this may depend what size majority Labour get. A larger majority may enable them to do something slightly more non-dom friendly. A small majority or a hung Parliament, less so.

17. Finally, of course, do remember that these reforms are not just about non-doms, but also about UK doms – who might choose to leave (or who, having left in the past, now do very well out of the reforms). 

John Barnett, Burges Salmon