Wealthy Brits quitting the UK in record numbers could face an ‘exit tax’ on their business assets levied by the Chancellor in this month’s Budget.
Rachel Reeves is said to be eyeing up a 20 percent charge on the holdings of those quitting the country for low tax havens which could net the Treasury £2bn.
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It comes after fears were raised earlier this year that as many as 16,500 millionaires would leave the UK this year because of hostile tax changes and plummeting economic confidence.
The new ‘settling up charge’ is said to be very likely because the UK, alongside Italy, is currently an ‘outlier’ among G7 countries who already impose similar taxes.
Currently, anyone leaving the country can sell off British assets without paying Capital Gains Tax (CGT) at 20 percent. But the Chancellor is looking at making those emigrating liable to pay CGT on their assets on departure with a possible option to delay if they do not want to liquidate them immediately.
Any new exit tax is likely to be combined with a policy to stop new immigrants from paying CGT on profits from investments individuals made in the UK and abroad before arriving here.
The Treasury has previously played down concerns that the super wealthy are increasingly quitting the UK although the government are said to be worried about the numbers leaving.
The Henley Private Wealth Migration Report has predicted that the UK would lose twice as many high-net worth individuals as China and ten times as many as Russia this year.
Rachel Reeves is said to be plotting the latest raid on the rich to raise £2billion as she looks to plug a black hole in public finances
Under the Chancellor’s new scheme, emigrants would need to pay up at their point of departure
James Smith from the Resolution Foundation told The Times online that there was a ‘precedent’ for the tax because the UK was ‘something of an outlier’ in not having the settling-up tax and there was a ‘precedent’ for the Treasury to follow.
‘The idea would be that if someone decides to leave the country and relocate to a low-tax jurisdiction they would have to pay tax on any asset ‘gains’, like shareholdings, that remained in the UK,’ Smith said.
However, Mr Smith warned the government faced ‘capital flight’ with the well-off taking their money out of the country as soon as they could before any new tax was implemented if any new policy was not announced and imposed at once.
He said people could ‘try to leave the country before it comes into effect’ but added ‘there are ways in which it could be brought in immediately’.
The new tax may not have been possible before Brexit when any such charges could have been hampered by EU rules on freedom of movement, according to the first proponent of the policy
Professor Andy Summers of the Centre for Analysis of Taxation.
‘In the past, the difficulty has always been that the UK was a member of the European Union and the ability to levy a settling-up charge was restricted by EU rules on freedom of movement,’ he said.
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As the Budget looms, economists also warn that Reeves is set to make history by imposing taxes faster than any chancellor in 55 years.
Capital Economics forecast a £38 billion tax increase could come this month, on top of the additional £41.5 billion she raised last year. If this happens Reeves will have raised taxes more after only 17 months in power than any of her predecessors since 1976 did across an entire parliament.
