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Alterations to residence and domicile laws were poorly communicated and are likely to have a negative effect on the nation's competitiveness, peers in the House of Lords have said.
Members of the Lords economic affairs sub-committee have issued a report on the latest Finance Bill, in which they criticise the Government for failing to make it clear that the legislative changes 'are not intended to discourage non-domiciles from coming to the UK and that non-domiciles are important to the health of the UK economy'.
The document expresses serious concern - following evidence given by witnesses working in the private sector - that new residence and domicile rules 'seem likely to have a negative effect on the UK's competitiveness'.
It goes on: 'We think it vital that everything that can be done is done to retrieve the position'.
The consultation process leading up to the Finance Bill is also censured, with the committee remarking that 'it was a widely-held view amongst our private sector witnesses that the consultation on… residence and domicile had been very poorly handled and fell well short of the good practice they had seen on other topics'.
Witnesses 'had a number of reasons why the consultation… fell short'. These included 'a lack of a clear and consistent policy statement' from the outset and 'a lack of openness'.
The Lords report recommends that the Government 'does all it can to… maintain the UK's competitiveness by ensuring that the UK remains an attractive place for workers with key skills'.
It continues: 'We also think it important that those outside Government have the opportunity to see HMT's assessment of the economic impact of these changes so that they might form their own judgment.
'We therefore recommend that HMT should publish its economic impact analysis of these changes to residence and domicile so that everyone can share their thinking on this matter. We also recommend that HMT should update this analysis in 12 months' time in the light of events.
'More generally, we recommend that, in future, economic impact analyses should be published at the same time as any significant tax changes are announced. Such analyses are clearly a vital element in the decision on whether any tax changes should go ahead.'
However, veteran tax advisor Malcolm Gunn disagrees. The former Taxation editor, who this week writes for the magazine on the subject residence and domicile, said there is 'not much point seeing HMT's economic impact analysis because it would only contain uninformed guesswork by Treasury mandarins'.
He added: 'Although there have been reports of non-doms taking fright and leaving the UK, I have not had one such case so far - and any London [tax] firm has a considerable non-dom client base.
Malcolm concluded by noting that 'the absurd overkill in the draft legislation published in January was exceedingly damaging to the UK at the time, and the culprits should be duly admonished'.
