Take me home... or know when to run - Part 1

The iconic country singer John Denver wrote of blue ridge mountains, country roads and pining for home in West Virginia. But in my role leading the Family Office and Private Client team across KPMG’s Islands Group, I am seeing more people from around the globe question whether the place they call ‘home’ today is where they see themselves tomorrow.

International movement of people has been growing significantly over recent years. Accelerated by the pandemic, the explosion of remote working and now playing out against a backdrop of political, social, and fiscal uncertainty across so many global powerhouses. Alongside all this, the movement of capital into structures that provide protection, legacy, and long-term succession planning, continues at great pace.

Starting at the place I used to call home – the UK – I write this after Labour won a landslide victory in the recent General Election. A 2% increase in their vote, but a historic increase in their parliamentary representation.

Sometimes small margins can have significant implications, and one wonders if the ex-Chancellor Jeremy Hunt’s, reforms announced in March, may be one such area. Labour have broadly said they will adopt many of the Conservative proposals regarding non-domicile reform. But will those small areas of difference create a new picture over the coming months?

A quick recap – earlier this year Jeremy Hunt announced a fundamental reform of the UK’s tax landscape. This largely included a proposed scrapping of the concept of domicile, the remittance basis, and a wholesale move to a residency-based system of assessment.

A highlight of the proposed new regime includes a 4-year period for new arrivals where they would be exempt from UK taxation on foreign income and gains (referred to as the “FIG regime”), after which they are then taxed on their worldwide income and gains, irrespective of their domicile.

An enticing a measure as this might be, it can be contrasted with fundamental change to the taxation of the offshore structures set-up by non-UK domiciled people. This will narrow the ability to accrue income and gains in an offshore structure without those profits being subject to UK income or capital gains tax.

Alongside this, a reform to the Inheritance Tax (IHT) regime would see an individual’s assessment determined more simply by their length of time in the UK. Initial proposals suggest that after 10 years of UK residence an individual would be subject to IHT on their worldwide estate, and they would need to be out of the UK for 10 years to lose that tail.

I caveat that aspects of these provisions are expected to change greatly by the time they are legislated. We now know it will be Sir Keir Starmer and Rachel Reeves crafting the detail. And whilst current view remains that key characteristics of the FIG regime will be retained, the expected tightening up of relief provisions needs to be considered closely for those impacted.

Pre-election, Labour were clear in their intent to tighten the grip on offshore trusts by removing a critical aspect of Jeremy Hunt’s proposal. This was that new excluded property trusts set up before 6 April 2025 would be able to retain IHT protection indefinitely.

But it should also be noted that the new Prime Minister’s opening public address on Friday 5 July stated that “Changing a country is not like flicking a switch…it will take a while”. There is a school of thought that non-dom policy may well be an area where the PM and his team take a moment to assess the detail before ‘flicking the switch’.

So what are people thinking of doing, and how are they playing their hand? The answer, so predictably, is that it depends.

Some UK resident non-doms have accepted they have had it good to date, and they plan on utilising the benefits afforded by the proposed 12% Temporary Repatriation Facility. Whether or not this new government will make this facility available in the coming years is unclear at the time of writing.

Others, meanwhile, may wish to explore the use of offshore bonds or simply choose to live in the UK and accept the tax consequences. Some consider this the end of a convenient relationship, and it’s time to find a new place to call home, while many are considering re-structuring.

Most whom I have spoken to are simply waiting to see what comes next. But there is no doubt there will be significant numbers of wealthy people on the move – or at the very least looking at their options.

In part two of this article, I explore what opportunities these changes might create for expats, and how they affect the UK as a global competitor.