The Government sees the resident, non-domiciled community as a politically easy target
Tom Elliott, private clients partner at Crowe Clark Whitehill, says the proposals to bring all UK residential property into the scope of Inheritance Tax will create problems for foreign investors.
The Government sees the resident, non-domiciled community as a politically easy target. However, to justify the proposal to abolish permanent non-dom status by saying that these long-term residents should pay for the services they use, is at best misinformed and probably even disingenuous.
For those affected, they are either paying tax on an arising basis or are paying the Remittance Basis Charge of ¬£60,000 or ¬£90,000 each year, this in addition to the tax on their UK income and gains. As a contribution to the Exchequer, this is higher than the vast majority of taxpayers in this country.
I’m concerned by the proposals to bring all UK residential property into the scope of Inheritance Tax. For now, UK commercial property, such as offices, hotels, or industrial buildings, is not subject to IHT but these proposed changes will change the situation. For a foreign investor, this may makecommercial property more attractive.
I think property held for investment purposes should be excluded in the same way that investment into offices, factories and the like are. Since the 2015 Budget announcement, many clients started to be concerned about investing into residential property because, if those changes are made, their portfolio of residential properties will be suddenly exposed to Inheritance Tax from April 2017. For example, on a house worth ¬£1 million, the inheritance tax would be ¬£400,000. However, their commercial property portfolio will not be affected.
Given that there is no such tax in other jurisdictions, it is a mistake for the Government to go this route.