‘nom-doms’ are hugely controversial, with warnings they could lead
to a damaging exodus of talent from the UK. Jennifer
Lambe, senior associate in the Immigration Group at solicitors
Mishcon de Reya, provides a guide to the legislative complexity
behind the issue.
The chancellor of the exchequer seems to be at odds with the
home secretary. One aims to make it easier for overseas nationals
to come and work in the UK; the other, if predictions are to be
believed, is creating an environment for a mass exodus of top
financial talent and investment from the UK.
Go deeper with GlobalData
What is the legislative background? Recent changes to the UK
immigration rules have been streamlined and geared towards making
it easier for such applicants to qualify under the new points-based
system (‘PBS’). Of the five-tier system, which is replacing the
previous 80 or so routes of entry, it is mainly Tier 1 (Highly
skilled/Entrepreneurs/Investors) and Tier 2 (where an employer acts
as a sponsor for a job already offered) that are most appropriate
to the worlds of banking and finance.
Proof of academic qualifications (bachelors and/or masters degrees)
added to a previous year’s salary of £40,000+ (or the local
equivalent) will qualify aspiring UK workers for the relevant
points under the General Tier 1 (previously known as the HSMP), as
long as the requisite level of English language capability can be
demonstrated. Even Tier 2 becomes less complicated if the applicant
is set to earn that sum, as the test of the resident labour market
(usually done through advertising) becomes obsolete.
Potential investors are the recipients of even more favourable
treatment in that, of all the revised categories under the new PBS,
only they are exempt from the English language test prior to
qualifying for entry.
Great news, it would seem, for investors, self-employed
entrepreneurs and businessmen who decide to make the UK their
centre or the city ‘high-flyers’ who choose London as their
hub.
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By GlobalDataValued prize of citizenship
Although not always the final goal, British citizenship and the
accompanying passport is often a valued prize. But might the price
be too high, as changes to the tax regulations for UK resident
non-domiciled overseas nationals (‘non-doms’) are introduced?
It is typically British to have such delicious irony in the form of
a confusing ‘welcome and goodbye’ government policy. For the
revised immigration system has been devised to allow the UK economy
to access and encourage the continued influx of high net worth
individuals to the UK, now juxtaposed with the discouragement to
these very candidates due to the increase in tax to be levied on
wealthy overseas nationals who are non-domiciled.
However, this may yet help to align the chancellor’s proposals with
the home secretary’s ambitions, as ‘non-doms’ have to be here for
more than seven years before being subject to the proposed £30,000
per annum tax levy, yet it takes only six years (potentially) to
qualify for British citizenship. But there are two factors to bear
in mind.
Two issues
The first factor is that the stage prior to qualifying to
naturalise as a British citizen is the acquisition of Indefinite
Leave to Remain (ILR), a status that should usually be held for at
least 12 months prior to applying to become British. A fundamental
qualifying factor for this is a stated declaration of the
applicant’s intention to make the UK their permanent or main home.
The seriousness with which the UK government treats this
declaration of intent is demonstrated by the fact that if one does
something subsequently to contradict this ‘intention’ (such as
leaving the UK for two years or more) then the ILR status is
removed.
British citizenship may then be granted (upon application) after
one has made the declaration of intent for ILR and satisfied
certain residency requirements and, unlike ILR, one cannot ‘lose’
it merely by leaving the UK for a period of time. But how long
before the new British citizen non-doms become ex-pats in a more
favourable jurisdiction – and what might the government do to
counteract this?
The other factor is the qualifying residency requirements,
which may not have an impact on non-doms as such, as they would be
paying tax on their UK income and assets in any case (if they spend
enough time here to qualify to become British). But there is a
peculiarity here worth noting. Up until the chancellor’s pre-budget
announcement, the calculation of days in the UK for immigration
purposes was done differently to the same calculation for the
purposes of days present for tax. Specifically, the immigration
authorities counted any part of any day in the UK to be a whole day
‘in’; the tax authorities, however, counted any part of any day out
of the UK to be a whole day ‘out’. This meant that the aspiring
British national could be simultaneously ‘in’ and ‘out’ of the UK
depending on whether their tally was towards British citizenship or
their tax residency status. The chancellor considered adopting the
home secretary’s version of days ‘in’ and ‘out’, but high-level
lobbying has brought about the compromise suggestion of counting
each ‘midnight’ as a day ‘in’ for tax purposes. Either way, there
may be an impact on residency status for all overseas nationals
travelling regularly into and out of the UK.
There is already speculation regarding mass departures of non-doms
as a result of the Darling proposals; one claim is that 40 percent
of the top earners in the city are potentially ‘non-doms’. Will
these foreign nationals switch to other, more accommodating tax
regimes? Time will tell.
