LONDON: Some people may benefit from the need to shore up the UK’s appeal to mobile investors, as well as greater freedom over the design of tax incentives.
Chris Groves, a partner at law firm Withers, said: “It seems to us that one of the consequences of being more distant from Europe is that we will want to be open to the rest of the world.”
He suggested that planned changes to the rules for “non-doms” — people whose permanent home is outside the UK who can keep offshore income out of the UK tax net — could be postponed or even dropped altogether. Mr Groves said the need for revenues made it important not to drive non-doms out of the country. He said: “We need a friendly regime.”
But others fear that next April’s non-dom tax changes will — like the rest of the 40 pieces of tax legislation delayed by the referendum — end up being rushed. David Kilshaw of EY, the professional services firm, said: “My concern is the date won’t change and the attention it will receive and the time devoted to it will be squeezed.”
He thought that combating tax avoidance would move down the agenda as other issues became more prominent after the Brexit vote. But he noted that the government would have greater freedom to crack down on tax planning, such as the routing of rental income from property to a low-tax EU country.
There are other reasons why non-doms might face higher taxes. Michael Taylor, partner at Irwin Mitchell Private Wealth said that while the UK might become even more attractive to non-doms, “if economic uncertainty forces successive governments to raise more tax, the reform of the benign legislation affecting the tax status of non-doms might be in danger”.
Other potential beneficiaries from Brexit might include users of tax-advantaged investment schemes such as venture capital trusts, which could be made more generous if the UK did not need to comply with state aid rules.
Taxpayers likely to be potential losers include anyone affected by the tax rises that are likely to be needed to repair the hole in the public finances created by Brexit as well as those currently benefiting from the EU anti-discrimination rules.
The fundamental freedoms enshrined in the 1957 Treaty of Rome have led the European Court of Justice (ECJ) to strike down tax rules that discriminate in favour of a country’s citizens or residents. If the UK decided to become part of the European Economic Area, like Norway, the anti-discrimination rules would remain in force.
George Bull of RSM, an advisory firm, said: “As it has taken ECJ cases to force change in law and practice in France, Spain and Germany we have every reason to expect that once it is not necessary to treat Brits the same as EU nationals those advantages will be withdrawn.”
Mark Davies of Mark Davies & Associates, a tax adviser, said the UK would be freer to tax pensions that are transferred out of Britain — although double tax treaties would provide some protection.No Brexit, please, we’re British: expats try to secure life in EU Rush for European passports begins with various countries offering citizenship — for a price.
Investors who defer taxes by holding investments in insurance wrappers might also be affected by changes to the tax rules following Brexit, he said. Currently they can avoid tax by moving to another country such as France which does not tax insurance policies when they are encashed.
Another group at greater risk of discriminatory taxes are people with holiday homes in the rest of Europe. The 1992 Maastricht treaty provided some protection because it extended the principle of free movement of capital — to third countries, as well as EU countries.
In 2015 France was forced to stop charging second homeowners from outside the EU higher capital gains tax because of the rules on free movement of capital.
Dan Neidle of Clifford Chance, the international law firm, said that the rules would not stop an annual tax being imposed on foreigners owning homes, although he thought this unlikely.
Mr Groves said that people with property abroad should not worry about discriminatory taxes. Their main concern was the potential to lose the right to health insurance, depending on the deal eventually struck by the UK government.
They might also have to limit the time they spent abroad, even if it was just a matter of periodically going home for a weekend before re-entering the country. Depending on the rules of the country in question, “stays of more than 90 days might become a lot harder”.