This is partly due to the UK’s relatively high rate of IHT, but also because many non-doms will have arranged their affairs under older or existing rules to protect against their IHT liability, only for those protections to be removed when they are much older and therefore less able to plan ahead for their death.
Several trusts were created by non-doms for the IHT protections they offered.
Due to the complex web of overseas trust tax rules, it may be prohibitively expensive to unwind many of these structures such that the beneficiaries will be unable to get themselves back to a position where the trust assets are held in personal names again.
An option that is still available to the government is to provide a transitional period under which trusts can be dismantled without incurring heavy UK tax charges.
Whether these reforms make or cost the chancellor money may never be known due to the myriad of matters that are difficult to measure.
Ultimately, though, despite its importance to the UK tax code, the non-dom regime and its residence-based replacement will not be the only factors that determine the government’s ability to encourage investment into the UK to contribute towards its economic growth ambitions.
Sam Dewes is private client partner at HW Fisher
