The dust is starting to settle following Labour’s landslide general election win. But business is only getting busier for the private client advisers hurrying to understand what the change in government might mean for their UHNW clients, particularly with regards to the expected scrapping of the non-dom regime.
‘In the early hours of [the] morning when the election result had become clear, I was contacted by a [non-domiciled] UHNW client to confirm that he is definitely moving to Italy,’ Robert Brodrick, chairman of Payne Hicks Beach, confided to Spear’s last week.
Since then, there has been little let-up in the enquiries.
‘Do I look as tired as I feel?’ laughs migration and tax specialist David Lesperance over a Zoom call. He explains that he has been supporting not just UK-based clients, but also single family offices from France and UHNWs in the US, where calls for wealth taxes on Capitol Hill are stirring up debate among the country’s super-wealthy.
[See also: What does the Labour landslide result mean for UHNWs?]
In the UK, Lesperance says, Rachel Reeves’ comments around the ineligibility of excluded property trusts to protect wealth and assets are spurring wealthy clients to consider an exit. ‘The UHNW non-doms — they don’t need to stay in London to make and maintain their wealth,’ he says. Faced with the threat of 40 per cent inheritance tax on all of their worldwide assets, Lesperance says many clients will simply think: ‘London’s nice – but it’s not that nice.’
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While fresh HMRC statistics from earlier this week show the number of non-doms has risen, from 68,900 in the 2021-2022 tax year to 74,000 in 2022-2023, it is difficult to predict how many are considering an exit this tax year. According to prominent private wealth lawyer Alessandro Belluzzo, of Belluzzo International Partners, as many as a third of UK-based non-doms could leave.
Camilla Wallace, senior partner of Wedlake Bell, says many clients are expressing an interest in teeing up plans to exit as they wait and see what Labour do next. She explains that one UHNW client is no longer giving a donation in the millions to one of the UK's most prominent universities. 'It’s a shame — it's the charities and institutions that will also suffer through all these changes.'
But where are the super-wealthy non-doms heading? Spear’s posed this question a year ago to leading top tax advisers and migration specialists, including Lesperance, who now says that Italy, Dubai and Switzerland remain popular options, but UHNWs are getting creative in their exit-planning, just as more jurisdictions than ever are becoming viable options.
Italy: Not as great for capital gains
Great for: Anyone looking to live ‘la dolce vita’
Not great for: Entrepreneurs considering an exit event
A common and popular choice for clients, Lesperance describes Italy’s 100,000 euro lump-sum regime as ‘simple to understand and simple to comply with,’ an easy mantra that feels fitting for those searching for sunshine and tax efficiency on the Amalfi Coast.
‘Private equity chaps love it,’ says Wallace, who cautions that Italy is less good for clients who may want to crystallise capital gains. (Under the Italian rules, some ‘substantial’ capital gains are excluded from the lump sum regime and are subject to normal inheritance tax, according to Charles Russell Speechlys).
‘I’ve got a couple of tech entrepreneurs, they want to know where to go pre-exit. They have significant exit-events coming up, and they want to be non-resident at that time. Italy wouldn’t necessarily work for them.’
The scheme has gained significant credibility since it started. According to the Guardian, 549 and 1,339 people used the policy in 2020 and 2021, respectively. Withers partner Patricia Milner, whose firm has offices in Italy and has been advising many with ties to the country, tells Spear’s its tax authorities have been ‘very clear in how they’re taxing people’ and that ‘a lot of clients are looking to go there’.
Switzerland: Consider its business investment programme
Great for: Entrepreneurial HNWs
Not great for: Salaried HNWs
Beyond skiing and its world-class education, Switzerland also has an attractive tax regime for inbound HNWs.
The country’s non-resident tax programme allows new residents to pay a flat-rate fee, starting at CHF 200,000 (rising to CHF 600,000 per year in some Swiss cantons), though the UK’s exit from the EEA has meant the rules applying to Brits moving there are different from other EU nationals, says Wallace. From a non-EU country, a residence permit is needed to live in the country on a long term basis.
Switzerland’s tax regime allows HNW non-doms to avoid local taxes on their foreign income and gains — but residents taking up the offer are not allowed to work in the country.
However, the country’s business investment programme may be attractive for entrepreneurial HNWs. ‘That works for those who can set up an office,' continues Wallace.
Clients wishing to go down this route must establish a Swiss company, and make a business capital injection in the country of at least CHF 1 million. The scheme can also provide an eventual route to a Swiss passport — which would give clients access to the wider Schengen Area.
Portugal: Courting UHNW migrants once again
Great for: Would-be investors, talented HNWs
Not great for: Pensioners, UK expats
Thought by some to be aptly timed to coincide with the UK’s general election result, Portugal’s new centre-right government announced last week that it would bring back a new form of its non-habitual residence (NHR) regime, which was scrapped last year by the former ruling Partido Socialista party.
In an interview with the Financial Times, the country’s finance minister Joaquim Miranda Sarmento said he wanted to ‘attract some people’ to the country, but he added the new regime — a 20 per cent flat rate of tax, like the old scheme introduced in 2009 — would ‘exclude dividends, capital gains and pensions’.
The scheme had previously attracted UK expats seeking to enjoy a sunny retirement in the Algarve — a migration flow that many pundits have attributed to an unsustainable rise in house prices hampering local buyers. More than 30,000 non-EU nationals were granted Golden Visas before the scheme was scrapped, which some blame for a 60 per cent rise in house prices over a decade.
‘They got a lot of pensioners coming across retiring. They don’t want that any more, they are trying to attract skilled workers,’ says Wallace.
[See also: UHNWs plan so-called 'fire escapes' to leave behind the Labour government]
Malta: Europe’s ‘fastest growing wealth hub’
Great for: UHNWs looking for flexibility
Not great for: Those searching for a more established private wealth centre
The UK is removing its long-held remittance basis rules, making Malta’s remittance regime an attractive proposition for many UHNW non-doms. According to Irwin Mitchell, the country is expected to have a net in-flow of 250 millionaires this year, while millionaire numbers have risen by 74 per cent over the past decade.
Under the regime, clients can pay no tax on money that is not remitted to the country. If they do bring income into Malta, they can choose whether to either pay a special 15 per cent rate or a flat fee of EUR15,000.
The country also operates several residency programmes aimed at different groups of residents, including investors and retirees. It also has fairly flexible requirements: HNWs need to either prove they have EUR500,000 in capital or make a property purchase of EUR350,000.
‘Greece, Mauritius, Malta, and even Hungary are emerging markets,’ Mandeep Khroud, head of Irwin Mitchell’s UK immigration practice, tells Spear’s. ‘[Malta] is Europe's fastest growing wealth hub’.
Dubai and Monaco
Great for: Glitz, glamour, and low taxes
Not great for: Those searching for a quieter pace
HNW non-doms with a penchant for low or no taxes can also opt for Monaco or the UAE, or Bermuda or the Cayman Islands.
Wallace says Dubai’s Golden Visa regime is ‘pretty easy’ for UHNW clients to navigate – allowing family members to join in certain circumstances. ‘Even with the introduction of corporation tax, it’s very attractive.’
As a destination for families, ‘Monaco is improving,’ Lesperance says. ‘It 's got better schools availability than it did. So it's a little more friendly for families. They’re getting bigger apartments that are being built in the new developments.’
But, he cautions, ‘if you're moving from an estate in Sussex to a flat in Monaco, that's a big lifestyle change.’
Advisers spoken to by Spear’s recommend weighing up the lifestyle elements of a move rather than the tax aspects alone. ‘When you’re looking at this, and a client says “where should I go”, you have to drill down into what stage of life they’re at. Are they about to sell a company which would trigger a large gain… are they a retiree?’ Wallace says. ‘Are they glitzy or are they mountain hikers? Do they like sailing?’
Lesperance’s approach is to give clients a wide variety of options before working out a bespoke approach. ‘The tools I reach for most often — I would say we do a lot of Portugal, we do a lot of Italy. We do a lot of UAE, Switzerland, Ireland, Canada, [the] US,’ he says.
At any rate, Wallace recommends clients get planning immediately. ‘We are telling our clients to review everything and get ducks in a row, just in case we need to restructure or move quickly.’
Some options though may never rise in popularity. ‘The Isle of Man, it rains a lot. No one goes to the Isle of Man,’ Wallace laughs.
