Details of the ruling can be found here: http://www.pcc.org.uk/news/index.html?article=NzEyMA.

The departure of so many non-doms has confirmed widely-held fears that the £30,000 levy would drive them overseas. Although the levy may not be the only reason for the exodus, it has certainly played its part.

So, what is the cost to the UK? Well, it is possible that the loss to the UK economy will be greater than the actual income gained from the levy. Non-doms not only bring wealth and spending power to the UK, but also expertise and entrepreneurism, which in turn creates jobs.

Back in June last year, I wrote that the incoming Coalition Government had pledged to review the taxation of non-doms during its five-year term in office. According to HM Treasury’s ’Structural Reform Plan: Monthly Implementation Update’ for December 2010, this review is still “ongoing” and an announcement on the issue will be made in due course.

Under legislation brought in by the Labour government in April 2008, a non-domiciled or “ordinarily resident” individual, who has been resident in the UK for seven out of the preceding nine tax years (whether continuous or broken), and who claims the remittance basis, must pay £30,000 per year in order to continue to be taxed on the remittance basis (unless their unremitted foreign income and gains are less than £2,000 in the relevant tax year.) If an individual decides not to use the remittance basis (or not to pay the remittance charge), he or she will be taxed in the UK on his worldwide income and gains on an arising basis.

The Government’s failure to raise millions of pounds in extra revenue from non-doms is due to the fact that only 4,300 people chose to pay the £30,000 levy in 2008-9 – just one in twenty of the 86,000 people who completed a self-assessment tax return in 2006-7 on the basis that they were non-domiciled in the UK (this being the latest year for which such data is available.) Since the tax legislation was introduced in 2008, thousands of non-doms have left the UK and fewer people who would be eligible for non-dom status are moving here. In recent years, the number of non-doms in the UK was rising by about 4 per cent annually, but this is now slowing, with 2 per cent of non-doms having already left the UK and many others reducing the time they spend here. According to a recent report by The Financial Times, there has been a 25 per cent drop in applications from non-doms seeking residency in the UK, though this may be as much to do with the recession as the tax legislation.

So, what does the future hold? Well, the new coalition government has already stated in its recently-published Coalition Agreement that it will review the taxation of non-doms over the next five years. However, no detail of its plans were given. It is therefore worth bearing in mind what the Conservatives and Liberal Democrats were proposing before the general election. The Conservative Manifesto proposed introducing “a simple flat-rate levy” on non-doms, and the Liberal Democrat Manifesto proposed that the remittance basis regime should not be available to non-doms who have been resident in the UK for more than seven years.

It remains to be seen whether either of the Conservative or Liberal Democrat manifesto pledges will be implemented. Although the government review may not recommend any substantive changes to the non-dom rules, there is likely to be political pressure for non-doms to make a greater tax contribution, particularly if capital gains tax and VAT do rise in the emergency budget on 22 June. However, whilst we should expect changes in the future, the Government should not discourage wealthy entrepreneurs from entering (and remaining) in the UK. Non-doms have a lot to offer: they invest in UK businesses, bring entrepreneurial skills, and create employment (which in turn contributes tax revenues.)

The future for non-doms is currently uncertain, but hopefully the emergency budget will reveal some of the Government’s future plans.

The following policy agreements will be of interest to the property industry:

• Home Information Packs (HIPs) are to be suspended, but Energy Performance Certificates will be retained. Legislation will be required to completely abolish HIPs;
• Decision-making powers on housing and planning will be given to local councils, including new powers to stop ‘garden grabbing’ by developers;
• Home energy improvements will be paid for through savings made from lower energy bills;
• Reform the planning system to give local people the ability to determine the shape of the places in which they live. This will be based on the principles set out in the Conservative Party publication Open Source Planning;
• Abolish the Infrastructure Planning Commission and replace it with a democratically accountable system that provides a fast-track process for major infrastructure projects; 
• Plans to establish a high-speed rail network will continue, but plans for a third runway at Heathrow will be cancelled. No additional runways will be built at Gatwick and Stansted airports; 
• Maintain the Green Belt, Sites of Special Scientific Interest (SSSIs) and other environmental protections, and create a new designation to protect green areas of particular importance to local communities; 
• Introduce new measures to bring empty homes into use;
• Promote shared-ownership schemes and help social tenants and others to own or part-own their home; 
• Promote ‘Home on the Farm’ schemes that encourage farmers to convert their buildings into affordable housing; 
• Create new trusts that will make it simpler for communities to provide homes for local people; 
• Require continuous improvements to the energy efficiency of new housing; 
• Provide incentives for local authorities to deliver sustainable development, including for new homes and businesses; 
• Review the effectiveness of the raising of the stamp duty threshold for first-time buyers; and
• Bring forward the national planning statement so that it can be ratified by Parliament. The statement will enable new nuclear construction. The Liberal Democrats, who are opposed to any new nuclear construction, will abstain from voting on the issue.

These policies are part of the Government’s legislative programme for the next five years, and further detail about how they will be implemented will be published in due course.

1. Tackle ‘red tape’

Before the election, both the Conservatives and Liberal Democrats promised to tackle red tape, including imposing a “one-in-one-out rule” for new regulations. This rule will now be implemented. They have also agreed to scrap the culture of “tick-box regulation” enforcement and will introduce “sunset clauses” (a Liberal Democrat policy), so that rules will expire if they are not reviewed. Finally, the Government will scrap the “gold-plating” of European legislation (i.e the transposition of EU legislation, which goes beyond what is required by that legislation.)

2. Businesses

The Government aims to encourage new start-ups by reducing the number of forms needed to register a new business, so that Britain becomes the fastest place in the world to start a business (Conservative policy). It will also end the ban on social tenants starting businesses in their own homes (Conservative policy.)

3. Takeovers

The Government “will review the range of factors that can be considered by regulators when takeovers are proposed.” There are currently no further details. The Conservatives’ manifesto did not explicitly deal with takeovers, but the Liberal Democrats promised to ensure that the takeover rules restored a public interest test, so that a broader range of factors, other than competition, would be considered by regulators when takeovers are proposed.

4. Operating and Financial Reviews

The Government will reinstate Operating and Financial Reviews “to ensure that directors’ social and environmental duties have to be covered in company reporting, and investigate further ways of improving corporate accountability and transparency.” (Liberal Democrat policy). These Reviews were originally proposed, but then dropped, by the Labour Party in 2006.

It is currently early days for the Government, and their recently-published ‘Coalition Agreement’ will be implemented over the next five years. Many of the proposals lack sufficient detail at the moment, but this will surely become clearer over time. The emergency budget, which will be heard on 22 June, will be a starting point. From a small business perspective, look out for the capital gains tax changes.