A tax break for rich former non-doms that slashes their potential inheritance tax bills was included in the small print of the budget.
The benefit relates to how much tax this group faces having to pay on their global wealth held in trust.
When Rachel Reeves scrapped the non-dom status at last autumn’s budget, she brought their trusts under the same regime as ordinary taxpayers, who pay an inheritance tax (IHT) of 6% of the total value of a UK or offshore trust every 10 years from its creation date.
On Wednesday, the chancellor introduced a £5m cap on how much IHT can be levied every decade on non-dom offshore trusts created before the status was abolished. Experts said this would only help those worth more than £83m.
Treasury estimates suggest the change will cost the exchequer £30m. However, several tax advisers told the Guardian they considered that figure was likely to be too low, given the values contained within some trusts that could benefit from the tax break were worth hundreds of millions.
Three advisers added that most high net worth people who were put off the UK by the removal of non-dom status would have already left, probably leaving their trusts beyond the scope of UK tax.
Instead, one said there “could be a strong argument” that the new residency regime should be more generous on IHT, keeping offshore trusts out of scope. IHT is a factor that puts off some ultra-high net worth individuals from moving to the UK under the residency regime.
Arun Advani, the director of the Centre for the Analysis of Taxation and a professor of economics at the University of Warwick, said: “Non-doms who wanted to leave will already have done so.
“This cap, which only benefits those with more than £83m in trust, is a giveaway to the tiny number of former non-doms who already revealed they didn’t actually want to go.”
A Treasury source said: “This cap encourages ultra-high net worth individuals to remain in the UK and continue to contribute via economic and tax contributions.”
The OBR estimates that scrapping most of the benefits of non-dom status raises about an average of £117m per year up to 2030, though this is uncertain.
