For Ultra-Wealthy ‘Tax Regimes Come First’

Ultra-wealthy foreign investors will keep London flying post-Brexit as they are more concerned with being able to use a stable tax regime and being access the cultural environment the capital city offers than our relationship with the EU.

Immigration law experts at Irwin Mitchell Private Wealth believe that despite the challenges posed by Brexit, London will remain a world-class city for many years to come partly because the global elite continue to invest in the city.

The latest research from Savills saw robust levels of sales for properties valued at £15m or more, with 2018 sales totalling £2bn for this area of the market – a significant 43% increase from 2017 sales, which were £1.4bn. Savills suggests the reason is because prices have fallen, however it confirms a continued interest from overseas investors.

Experts at Irwin Mitchell Private Wealth argue that stable tax regimes are more important than Brexit for High New Worth (HNW) individuals wishing to move to the UK, most notably to London.

Expert Opinion

“London is still going to be a world-class city for the foreseeable future because despite the situation around Brexit, the UK remains an attractive destination, particularly for tax reasons.

“Prime central London real estate in particular is a good investment, and thousands of companies have their headquarters based here. The ultra-rich of the world, particularly those who are non-domiciled, will continue to come here for the advantageous and stable tax regime.” Philip Barth - Partner

The amount of non-domiciled individuals living in the UK has decreased since Brexit; the most recent data from HMRC showed there were 91,100 individuals claiming non-domiciled status in 2016/17 in comparison to around 120,000 in previous years. At the time this was attributed to political and economic uncertainty, though Irwin Mitchell Private Wealth tax specialists suggest Brexit was more of a trigger point than the real root cause: changes to the taxation of non-doms.

“The drop in registered non-doms in the UK for the 16/17 tax year coincides with the announcement of stricter regimes that would be implemented for them,” said George Merrylees, international tax partner at Irwin Mitchell Private Wealth. “There were notable changes to the taxation of carried interest and the domicile rules which made the environment less favourable than in previous years for UK resident non-doms.

“It’s much more likely that non-dom remittance basis users have left because of this rather than Brexit. Brexit could well have been a factor, but it would be more accurate to describe it as, for certain individuals, the straw that broke the camel’s back.

“The changes for non-doms have been brewing for years in the background – long before Brexit came about – and if further restrictions are implemented, we’ll no doubt see further departures.”

Currently non-domiciled individuals who live in the UK have access to a much better tax position – any income on gains from outside of the UK can be kept outside the UK tax net, plus overseas assets are protected from inheritance tax.

Philip added: “There’s also another cultural layer to consider when it comes to the global elite wanting to live in the London. They often want to educate their children at the best British schools and universities, and conduct their social lives in one of the cultural hubs of the world.

“The global elite are very mobile because their assets are structured so that they can move easily. Although we have seen less relocation to London since 2016, HNW individuals, wealth creators and senior employees are still moving to London. We’ve also seen UK resident individuals from the EU27 investing in new business opportunities in London and the UK.

“As long as the UK continues to have a tax regime that suits them, then HNW families will be buying and investing in London for many years to come."