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Non-dom reform: not as dead as you think

Forget what you may have heard,  there's a good chance the government may want to revisit the changes to the non-dom rules after the election, writes Daniel Bentley-White

To paraphrase Mark Twain:  reports of the deaths of the non-dom changes in the Finance Bill have been greatly exaggerated (his version was much catchier).

True, Theresa May’s snap election announcement – which was completely logical and predictable and so caught everyone by surprise – has butchered the said legislation.  Provisions which would have seen UK taxes penetrate opaque company structures, and engulf individuals who had lived in the country for 'the immediately preceding' 15 years, have been scrapped as too complex to finalise before MPs head out for their very public job interviews.

This turnaround has been feted in some quarters as the demise of the reforms, sparing HNW non-doms at the eleventh hour.  However, to use a favourite saying of my dear grandmother: 'don’t count your chickens before they come home to roost' (she’s a little doolally).

The case for pessimism is simple: why would the Tories drop their long-standing policy? During the House of Commons debates the Financial Secretary to the Treasury, Jane Ellison, confirmed that certain clauses had been omitted from the Bill because of time pressures, but reiterated that the government remained committed to these provisions, and would seek to legislate for them at the earliest possible opportunity. And why would any other party resist this fiscal opportunity?  It’s not a 'vote losing' strategy to levy more taxes on those who are portrayed in the popular press as super wealthy and morally obliged to pay their fair share.

The assumption is that the House of Commons on 9th June will resemble a sea of blue (which, now I think about it, is just a normal sea).  Mrs May will have the parliamentary clout to push through whatever legislation she likes, and then abolish Tuesdays for good measure if she feels like it.  The irony is that a wobbly Labour government in a hugely divided Parliament probably has better odds of killing off the reforms for good – but I digress.

What cannot be known, however, is from when the changes will eventually take effect, due to some knotty constitutional problems.  The provisions of Finance Acts generally take effect from the beginning of the tax year in which they are enacted, even if Royal Assent isn’t granted until later in the year.

I suppose the government could argue that the public should expect it to reverse its reversal of the reforms, much as it reversed its reversal on National Insurance, but I wouldn’t envy the Whitehall suit tasked with that brief.

Peering further down the constitutional law rabbit-hole, the incoming Commons intake will form a new Parliament, even if it looks much like the old one but with some conspicuously empty Opposition benches.  As any junior knows, and under no circumstances has to be reminded by a senior colleague before writing an article on the ditching of non-dom reforms, one Parliament cannot bind another.  Can the new rabble impose laws retrospectively at a time when a different Parliament was in power?

In typical copout style – maybe.  Non-dom HNWs can enjoy the reprieve for a little while, but need to be prepared for these provisions to strike back in earnest.  One thing’s for certain though – the reforms are definitely, without a shadow of a doubt, happening at some point.  Probably.

Daniel Bentley-White works at boutique private wealth law firm Maurice Turnor Gardner LLP