Non-Dom Changes – A New Landscape For UK Immigration? - Boodle Hatfield

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10 Apr 2024

Non-Dom Changes – A New Landscape For UK Immigration?

Plans were announced at the Spring 2024 Budget to abolish the current ‘non-dom’ tax regime and move to a residence-based system from 6 April 2025. These changes are very wide reaching – presenting opportunities for some, and challenges for others.

Given that the changes are necessarily aimed at individuals with non-UK as well as UK ties, the immigration implications of the proposed changes are far reaching, but have not yet been widely discussed. The knock-on effects of the non-dom changes on the UK’s immigration landscape can be best understood when considered in the context of the Immigration Rules. Advisors, individuals and families are navigating a new landscape. Key considerations include the UK immigration options currently available to those considering taking advantage of the new four-year regime for income and capital gains, and an exploration of how the new four-year regime could be the catalyst for the introduction of a new “Investor Visa.”

The four-year regime – Why it isn’t five?
The UK Immigration Rules are drafted on the basis that in most cases a person has to be lawfully present in the UK for five continuous years in an eligible category in order to apply for Indefinite Leave to Remain (“ILR”). Absences of more than 180 days in any one-year period (calculated on a rolling basis) break this continuity. ILR is effectively the reward meted out by the Home Office for spending the majority of your time in the UK, in compliance with the Immigration Rules, over a five-year period. At present it is almost impossible to obtain ILR without becoming tax-resident in the UK for the duration of that period.

It is therefore unsurprising that the proposed new regime – which exempts arrivals to the UK, who have not been UK resident in any of the previous 10 UK tax years, from UK tax on their foreign income and gains (FIGs) for their first four years of UK residence – does not allow its beneficiaries to obtain ILR purely on the basis of this period. It is consistent with the current regime that a greater degree of “commitment” to the UK is required in order to obtain ILR. Based on the current immigration rules, at least one year’s additional stay in the UK, during which time the individual would be taxed on FIGs, would be required to obtain ILR.

The four-year regime – current visa options
For those who do not already have a right to reside in the UK for the relevant four-year period, the visa options are relatively unattractive. Many of those who wish to take advantage of the regime will not wish to work, study or set up a business in the UK, and yet the visa options available in the wake of the closure of the Tier 1 (Investor) category are largely geared towards these forms of economic activity. For example, the skilled worker route requires the applicant to undertake work for a UK company, whilst the innovator-founder route requires applicants to establish their own business in the UK. Alternatively, the global talent route requires individuals to pursue work in the UK within their field of talent and the student route requires individuals to study at an accredited higher educational establishment.

A new four-year “investor visa”? 
When the Tier 1 (Investor) visa category was closed without warning in February 2022, the Home Office indicated that it would open a new route based on ‘active investment’ as early as autumn 2022. It was anticipated that the route would require evidence of an active history of investing in innovative businesses overseas and would require the applicant to invest in a similar business in the UK. Such a route has still not yet materialised despite the major changes to the Immigration Rules – in particular the skilled worker route – which have recently been announced.

If, however, the UK wants HNWs and UHWIs to take advantage of the new four-year regime and boost the UK economy by spending their wealth in the UK during that period, a visa category based on investment in the UK is an essential. It would not be surprising to see, therefore, a new “investor visa” emerge as an inevitable corollary if a future government puts the four-year regime into practice.

This article was first published by WealthBriefing on 10 April 2024.