Channel Islands could be set to benefit after change in UK non-dom tax policy

  • ITV Channel's Fred Dimbleby has been finding out what a change in UK tax policy could mean for the Channel Islands

The Channel Islands could be set to benefit from a change in UK tax policy.

It comes after UK Chancellor Jeremy Hunt announced in the spring budget that the British Government is ending non-dom status, a move that affects 70,000 high-net-worth individuals and may see some move to the Bailiwicks.

The scheme currently allows foreign nationals to live and work in the UK for 15 years without having to pay tax on their earnings on capital held abroad.

What are non-doms?

Typically someone who was born overseas and spends much of their time in the UK but still considers another country to be their permanent residence.

Non-doms are wealthy people who choose not to be domiciled in the UK to avoid paying high taxes.

There are estimated to be 70,000 non-doms in the United Kingdom but now the scheme is abolished, the Channel Islands could become more attractive.

Tax expert Thomas Adcock says: "It's not that far away, the language is the same of course, the legal system is similar and it's a beautiful place to be."

Both Jersey and Guernsey have tax regimes with no inheritance or capital gains that could benefit those considering their options.

Neil Hoolahan from Grant Thornton says: "There are also tax capping arrangements in both islands, whereby a non-dom can cap the maximum amount that they'll pay on their worldwide income."

Tax expert Rachel De Souza adds: "When you have a lot of people of high-net-worth, you've got services around that support them so these are generally local businesses, local entrepreneurs that are benefitting from the fact that you have people with a lot of money to spend."

But Dame Margaret Hodge MP from the British Anti-Corruption and Responsible Tax Group says the Channel Islands should be more transparent in their financial affairs.

She explained: "In the way that they choose to administer their jurisdictions, they are causing a lot of damage not just to the UK but across the world."

In response to comments made by Ms Hodge, the Government of Jersey describes itself as having "one of the most established beneficial ownership registers in the world".

It says: "The register was first established in 1989 and contains information which is reliable, accurate, verified and that is already readily available to international law enforcement and tax authorities.

"Independent international evaluations have confirmed Jersey has a 'leading position' concerning beneficial ownership transparency.

"Despite this position, it is regrettable and misleading that inaccurate descriptions of the position in Jersey persist."

This is ultimately a debate about whether the islands want to be the place people turn to when they want to pay less tax.

The benefits for the non-doms are obvious - no capital gains or inheritance tax as well as potential caps for the ultrarich.

There are also similarities between the jurisdictions legally and socially - a shared language and of course the beauty of both Jersey and Guernsey.

There are significant potential benefits for the island too, with more wealth coming onto our shores.

Labour wants to go further than the Conservatives in what they describe as a "crackdown on tax dodgers".

The question for islanders is, do we want to be the place to take them?

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