How potential non-dom changes could impact international business expansion in the UK

As we progress through 2024, international businesses eyeing the UK for expansion are facing new challenges.

While the UK has long been an appealing destination due to its global reach, advanced infrastructure, and favourable tax policies (especially for non-domiciled individuals (non-doms)), potential changes to the tax regime could reshape the landscape for foreign investors and entrepreneurs.

Why the UK has been attractive for international businesses

A major draw for international business owners and investors has been the non-dom tax regime.

This policy allows individuals that are resident in the UK, but do not consider the UK to their long-term, permanent home to limit their UK tax liability to their UK-based income, with foreign earnings only subject to UK tax if brought into the country.

For many international entrepreneurs, this has created a tax-efficient way to operate within the UK while benefiting from more favourable tax conditions overseas.

The ability to minimise tax on foreign income and capital gains has been a significant advantage.

Is the non-dom regime set to change?

There are increasing signs that the non-dom regime will be in for a major shake-up.

Earlier this year, the Conservative Government announced plans to phase out the policy, a move that the Labour Government, now in power, has supported. This is in line with their promise to end the non-dom status, however, there will be differences from the measures initially announced by the Conservative Government.

Concerns are mounting that these changes could drive wealthy individuals and business owners out of the UK, as the upcoming Budget is expected to introduce new rules and potentially remove currently available concessions.

However, not all aspects of the reform are finalised.

The Treasury is reportedly rethinking parts of Labour’s planned overhaul, particularly as there are concerns that scrapping non-dom status might not generate as much revenue as expected.

The Capital Gains Tax (CGT) factor

Recent figures show a notable rise in Capital Gains Tax (CGT) receipts, even as rates have been reduced.

This increase suggests that some investors are selling assets in anticipation of tax hikes in the forthcoming Budget.

If further changes to CGT are introduced, international businesses holding UK-based property or other assets may want to reassess their tax strategies, especially if they are considering sales soon.

Key considerations for international businesses

For companies looking to expand into the UK, the potential changes to the non-dom regime are just one factor in the larger picture. Here are a few crucial points to keep in mind:

  • Tax efficiency – While the non-dom regime might be on the way out, the UK is still keen to attract global investment and talent. Treasury officials have indicated that any new tax regime will be structured to remain competitive internationally. Businesses should stay updated on developments and be ready to seize new tax-efficient opportunities as they arise.
  • Capital Gains Tax trends – With CGT receipts rising, international businesses with property or other investments in the UK may find now a good time to evaluate their assets and consider potential tax implications before further reforms are introduced.
  • Regulatory stability – Despite potential tax reforms, the UK continues to offer a solid and respected regulatory framework. Sectors like finance, technology, and professional services can still rely on the UK’s strong legal and regulatory systems, which contribute to its appeal as a global business hub.

As we await the Budget, businesses should take this time to assess how potential changes to the tax regime, particularly around non-dom status and CGT, could affect their operations.

While there is still uncertainty, the UK Government has promised that any reforms will be carefully considered to ensure the UK remains a competitive environment for international business.

If your business is expanding into the UK, get in touch with our team. We can help you manage the evolving non-dom situation and ensure your business is well-prepared for the future.

Awards and Accreditations

Get in touch

Get in touch

If you would like to see full details of our data practices please visit our Privacy Policy and if you have any questions please email contact@grunberg.co.uk.

x