Starmer & Reeves Budget 2024 – A whole lotta pain? (PART THREE)

Introduction

‘Squeeze ‘em til the pips squeak’ and ‘make ‘em howl in anguish’ Denis Healy almost said.

Subject to what the ‘pips’ are, for the purposes of this series, we love his style.

In fact, Mr Healy might be the honorary chair of our tax torture chamber.

So, let’s plunge into the higher levels of our budget of horrors.

What ‘hurts even more’?

Stopping the boats… and private jets

In case you didn’t notice, the previous government had a little thing around stopping boats. You might have heard about it from time to time.

Of course, this was all about keeping certain people out of the UK.

But will Reeves look at charging HMRC with the equivalent of stopping the boats (yachts?) and private jets leaving the UK?

A recent report showed a significant net outflow of millionaires from the UK. It appears that the UK is about as attractive as China for millionaires (thought perhaps less chance of disappearing).

Again, with the changes slated for non doms (lest we not forget this was the Tories proposal) there will be many soon to be former remittance basis users considering whether they can do whatever they need to do in the UK whilst being non-resident.

This feels more likely if Labour do decide to squash existing excluded property trusts when the new legislation sees the light of day.

Of course, this will mean these measures raise less moolah than first trumpeted.

What might a painful approach look like in this area look like?

Firstly, it might mean HMRC simply patrolling this fiscal border more tightly. In other words, more enquiries into whether the statutory residence test is being applied properly.

Secondly, we might see a tightening of the rules. Effectively, all of the tests in the SRT can be reduced to a day counting exercise.

As such, these thresholds might be tweaked to make breaking residence more difficult.

Exit tax

But, if people are leaving, we might as well throw the kitchen sink at them, mightn’t we?

An exit tax would represent a skim on the assets of those leaving the UK.

This might be an exit charge representing capital gains tax on unrealised assets at the time of departure.

“How very dare you?” I hear you say. Firstly, don’t blame me. But secondly, it wouldn’t be unique.

There were huge howls of anguish and gnashing of teeth when Norway announced a tightening of its existing exit tax of 37.8% on unrealised gains following departure from the country.

There are a number of other EU countries with exit taxes – including Spain, Estonia, Denmark, France and Germany (albeit none as spicy as Norway’s)

As Roger Ver recently found out to his cost, the US has a similar tax on giving up one’s citizenship.

This nicely takes us onto the next potential ‘ouchy’.

Copy what the US (and Eritrea) do

Famously, the US has citizenship based taxation. So, if you are a US citizen, or, say hold a green card, you pay US tax on worldwide income and gains regardless of whether you are resident there or not.

Less famously, the same is true of mighty Eritrea.

Of course, escaping such a tax is difficult. One needs to give up citizenship. You’d need another citizenship. You might also even have to pay an exit tax.

If Reeves really was committed to maximum howls of anguish, and wanted to get a firm grip on those pips, then a model is sitting right there in Asmara (or Washington DC, if you prefer).

Eeek!

Conclusion

My pips are feeling truly squeezed now.

What? You want more.

Surely not.

Well, let’s see what we can do…