Labour’s expat exit tax is deeply flawed

The Labour government’s potential expat exit tax will drive Foreign Direct Investment (FDI) abroad to countries such as France, say leading audit, tax and business advisory firm, Blick Rothenberg.

Vanesha Kistoo, head of the firm’s French desk said: “The Labour government’s proposed expat exit tax is deeply flawed and does not make fiscal sense. It is likely to encourage wealthy expats to move to other countries, with one option being France.”

She added: “Wealthy expats will likely try to leave the UK before they have to pay the exit tax or simply not come to the country to begin with, meaning the exit tax take will diminish over time. As wealthy expats are only 1% of the UK population, the overall exit tax take will also likely be small, meaning it will not do much to fill the ‘black hole’ in the nation’s finances Labour has identified.”

Vanesha said: “When they leave, expats will go to countries where the tax regime is more favourable, especially in light of the UK’s new Foreign Income and Gains (FIG) regime, where tax relief only lasts 4 years. In comparison the French expat tax regime is much more attractive because it can be accessed by employees who were not French tax residents, including French nationals, for 5 years. The scheme also has an exemption for income tax on employment income and wealth tax on assets located outside France.”

She added: “Although there is an exit tax in France, only those who leave the country after having been resident in France for six of the last ten years, need to pay it. Hopefully the UK government implements a similar timescale if they go ahead with their exit tax plan.”

Vanesha said: “If the UK government wants long term growth, not just a short-term tax take, they need to start to announce measures to continue to attract FDI into the UK. Which means attracting wealthy expats rather than giving them more and more reasons to go elsewhere.”