The UK's wealthy non-doms are calling for an Italian-style tax regime to prevent a wealth exodus.

• The wealthy non-doms in Britain are advocating for an Italian-style flat-tax system to prevent a wealth exodus due to the threat of losing their preferential status.
• The Foreign Investors for Britain lobby group will meet with government officials on Thursday to discuss the upcoming budget proposals.
• Leslie MacLeod Miller, chief executive of Foreign Investors for Britain, stated on CNBC on Wednesday that people are making plans to leave if there's no stability.

The wealthy non-doms in Britain are advocating for an Italian-style flat-tax system to prevent a wealth exodus, as their privileged status is being challenged in the upcoming budget.

A lobby group comprised of non-doms and their advisers, along with think tank Oxford Economics, have proposed a tiered tax regime (TTR) that would charge wealthy foreigners a single annual fee in exchange for exemption from inheritance tax (IHT) on non-UK assets and U.K. tax on overseas income and gains for up to 15 years.

The annual fees would be determined based on an individual's net worth, with proposed charges ranging from £200,000 ($260,447) for those worth up to £100 million, and an annual charge of £2 million for those worth over £500 million.

Unlike Italy's government, which imposes a flat tax rate of 200,000 euros per year regardless of income bracket.

On Thursday, government officials will meet with representatives from Foreign Investors for Britain to discuss proposals.

Leslie MacLeod Miller, chief executive of Foreign Investors for Britain, stated on CNBC on Wednesday that people are making plans to leave if there's no stability.

The U.K.'s non-dom status is a colonial-era tax rule that allows individuals residing in the U.K. but domiciled elsewhere to defer paying tax on foreign income and capital gains for up to 15 years. As of 2023, approximately 74,000 people have benefited from this status, an increase from 68,900 the previous year.

The Labour Party's recent announcement to intensify the abolition of non-dom status and ban the use of trusts to hide overseas assets from IHT has put pressure on the regime, which has been politically controversial for a long time.

Rachel Reeves, the Finance Minister, is predicted to reveal substantial tax increases in her October 30th budget in an attempt to bridge the £40 billion deficit in the public finances. The Treasury did not provide a prompt response to CNBC's request for comment on the shortfall or the impending negotiations with FIFB.

Non-doms move their money

The Treasury could potentially earn £2.6 billion ($3.38 billion) through the cancellation of the program, as previously stated by Reeves.

The research by Oxford Economics last month stated that the plans could result in taxpayers losing £1 billion in direct revenue by 2029/30. The study surveyed 72 non-doms and found that they had invested a total of nearly £8.5 billion into the UK economy since their arrival.

According to Alex Stewart, associate director at Oxford Economics, this investment is at risk because it represents only a small portion of the money invested by non-doms.

Indeed, some have already begun making pre-emptive moves.

The economic think tank released new research on Wednesday that indicates non-doms who participated in the survey had already divested at least £842.2 million in anticipation of the changes.

Several attendees at the event, who wished to remain unidentified, expressed their intention to relocate to countries such as Italy, Switzerland, and Dubai if stricter measures were implemented.

If the TTR is introduced, 13% of non-doms and advisers would still move ahead with plans to leave, while 98% would leave if the proposed flat-tax regime is not introduced, according to Wednesday's research, which surveyed 115 non-doms and 42 advisers.

It's important to understand those with broad shoulders and long legs, as MacLeod Miller said.

Charles Russell Speechlys partner Dominic Lawrance stated that the proposed plans were an improvement on the Italian system because they would be scalable based on wealth brackets, thereby generating additional tax revenue. Lawrance, who helped draft the proposals, emphasized that they should be introduced alongside existing measures to abolish non-domicile status to "avoid any perception of a U-turn."

Oxford Economics is currently working to determine an estimate for the revenue generated from the TTR proposals.

Labour courts wealth creators

The Labour government has pledged to address unfairness in the tax system by closing non-dom tax loopholes in its election manifesto. However, it has since appeared to soften its stance, with Reeves reportedly reconsidering some elements of her non-dom crackdown.

On Monday, Keir Starmer, the Prime Minister, aimed to position the U.K. as a center for growth and prosperity by inviting 300 business leaders to Labour's first International Investment Summit.

At the event on Monday, Sadiq Khan, the Mayor of London, stated that the government must strike a delicate balance between not antagonizing wealth producers and ensuring compliance with regulations.

It is crucial that we comprehend the importance of having wealth creators in London and our nation. This includes individuals who invest in our city to generate jobs, wealth, and prosperity, as stated by Khan.

The government's primary objective is growth, and it cannot be achieved without the investment of the individuals being discussed. The prime minister's statement should reassure people, as he stated.

On Monday, Michael Mainelli, the Lord Mayor of the City of London Corporation, acknowledged that there is an issue with non-dom rules but emphasized the importance of maintaining a competitive tax regime in the U.K.