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Welcome to in the City.

Each week we unpack a story that's crucial to the world's financial capitals.

I'm at alegra Stratton.

So okay, we know that it's a big news week, but interestingly, uncertainty in the Middle East has not yet had a huge effect on the markets.

We also are not unaware promise you that there's been a G seven and out of that the UK did get some progress on its trade agreement with the US.

But even so, what has got many people talking in the city is what an earth may or may not be happening to the Chancellor's crackdown on non doms.

This week we returned to that decision that Rachel Reeves made to essentially end the non dom status.

There are rooms that she may be about to do a U turn.

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Okay, So look, some news outlets are reporting Rachel Roofs could reverse a decision to charge inheritance tax on the overseas assets of non doms.

We're going to get into how substantiated those claims are in our conversation shortly, but before that, let's have a quick look at the impact of the policy.

Our latest reporting shows that the exodus of non doms could lead to a net drain on the UK economy, with estimates suggesting we could lose thousands of jobs and up to twelve point two billion over the coming four years.

Now, the journalist behind that is Ben Stupples and he joins us in the London studio.

Ben covers the world of ultra wealthy for Bloomberg News in London.

Ben Hi, Hi.

All right, Ben, Before we get onto whether or not your sources believe that there is this U turn coming on the non don status, quickly, just give us a sense of how much of an impact it's had.

Yeah, thanks, sir legre.

It certainly had an impact, and let's just unpack that for a second.

Being a data business, we sort of tried to take a data driven approach to this.

So what we looked at was, in the end, thanks to my colleague Max Harlow, very talented data guy in our newsroom, we analyze five million filings in Companies house.

That's a pretty comprehensive data set.

And what the question we asked within that was, okay, there are certain filings you have to make if you are a director business leader in the UK, if you are going to live somewhere else.

So we searched for that filing and we found that year on year, April twenty twenty five, the filings for that month were about seventy five percent higher than a year before.

Now why is that important?

That month?

The non norm system ended.

The concept of non dom ceased to exist from early April.

So what we can see here, maybe for the first time, is a definitive signaling, an indication that not all is well with Britain's what I guess we could term billionaire economy.

And we hadn't had that before.

Now why haven't we had that?

The way nondonms have to disclose, the way that they have the status and all that stuff, it's not like a normal tax payer.

There's a bit of a lag in the time that HMRC, the UK Tax Authority, collects and publishes the data for that.

So actually HMRC, on the back of US publishing a big story last week, said that they will put out the final numbers out in twenty twenty seven.

So in the meantime we're sort of stuck in this sort of a bit of a guessing game and we're just doing our very best to try and use the data that exists right now to try and have a sense of is this really working from Britain.

So, Ben, do you from the sources you have in the Treasury, do you think that the Financial Times that first reported there was a U turn coming on this end to the non dome status or certainly you know substantial tweaks do you think that that's incorrect or do you think something's afoot?

I can certainly understand why this might be on a Racha Reaver's desk in the Treasury.

Why because first and foremost this is the topic causing the biggest heartburn, is what the Financial Times reported.

Actually that's the word they use, heartburn, heartsache.

It is this is the biggest problem for the non dome changes.

Why is that?

It is because we previously we're actually quite deliberate in saying to nondomes we're only going to text you on what's happening in the UK.

Create a business here, you pay tax on that.

Everything else that's overseas shares in your holding company.

Let's say you're an Indian steel tycoon or a European tech entrepreneur.

Don't worry about that stuff.

Just worry about what's getting on in the UK.

If you live here long enough fifteen years, yeah, you'll eventually pay full UK tax on that.

But what raych Reeves has done is go after from pretty much.

Instead of fifteen years, we now have four years, right, so that's a big deal.

We've slashed the time that people now exposed UK tax and the overseas assets, and so it was the biggest issue and it was raising only for about five hundred million according to Office for Budget Responsibilities of Forecasts, out of an overall package that was meant to raise more than thirty billion.

Now let's think about this from a sort of pragmatic power politically.

You know, how does this look in the treasury and beyond When you're also hiking taxes for inheritance tax for British farmers, you're also doing it for UK business entrepreneurs.

Right, so we've also hiked you know, roch to Reeves said those are the broadest shoulders must bear the brunt of all this business owners are getting a massive whack on inheritance tax, So we don't right now, we don't know for sure if this is going to come down the line, you know.

Basically this is all what we can define it now is I guess speculation ahead of the next budget, which will be based on previous years October November time, So that's the drum of speculation is already starting over what was announced only months ago, right and just being enacted into law.

And this is clear.

This is this is actual legislation.

So we'd need another Act of Parliament too, as far as far as I understan it, we need another Act of Parliament to amend all these and to make any other big wholesale changes.

The reason why this is a hair that's convincing to have running is that there is a now a recent history of U turns, and so it feels completely conceivable that if evidence comes in that it's backfiring, that she would want to reverse track.

But you're also right that she's also got pressure from her left in the Labor Party, given what they're doing with farmers and so on, to keep up the sort of parity.

We can't know now, and we won't know now what they will end up doing, But I wonder whether it's you can give us insight into whether it would even help if she were to do this.

I mean, what I find interesting about your reporting are the analysts who speak to who who say, look, there's a trust issue here now, so say they did reverse on this.

What's to say, given everything any intelligent person is reading about the state of the public finances, what's to say, yes, she gives non doms a reprieve now, but what about in another year when things are sticky, perhaps even harder fiscally.

You're completely right doing.

You asked me what my sources have said in the back of this.

We did survey a lot of private wealth sources yesterday, asking hey, did you see this coming?

A lot of them said it frankly bent.

The horse has already bolted, to quote one source, If Rachel Reeves does this now, it doesn't even matter.

Really, Yeah, it's a big issue.

But actually, what we've had here is it's not a single decision that made non doms go.

Let's just rewind the tape a little bit.

It wasn't actually the labor who came out with these moves in the first place.

It was the Tories in March twenty twenty four, and then richids soon at Courts the election, and then we get Labor saying you know, we're going to do that, and we're going to go even further.

So that was in July.

So I believe it's in the build up to July with Labor winning the election, and then after a lot of non doms went okay, I was thinking of going, but now I'm definitely going to go.

And then we had rach Reeves standing up at the budget saying I'm doing this.

So that was almost like a triple whammy.

It wasn't like sort of like a one stop hit, right, a sort of a hit and run legislative sort of move, a.

Systematic ratcheting up of pressure on this group.

Yeah, and then the broader context here is a lot of non dums were already settled even before that.

Why because you know things about Brexit and the fallout of that.

You think about We've had half a dozen prime ministers within the past decade, So Britain's traditionally attracted the global elite.

Why because of the political and economic and legal stability.

They always come up when he talked ultra and it worths about why they love London, why they love living in Britain.

We've actually pulled the rug from under their feet for those three reasons really over the last decade.

And if Rachel reeves to bring it full circle, if ate to Reeve's and says, actually, I'm going to scrap all that inheritance tax stuff, the thing that I was really making a big song and dance over for nondoms, We're not going to do it now.

It actually furthers that narrative that you can't really trust Britain now.

You're not really economically and fiscally secure here.

Yeah, you've got sort of a double vulnerability for her.

One, it's your kind of lack of clarity and conviction in what she believes.

And then secondly, you know, the direction of travel is that there's a hole in the public finances rather than don't worry the public finances are fixed.

But just looking at the other jurisdictions that have really aggressively been pursuing the British ultra ultra high net worth individuals, as we say, rather than the super rich, which used to be the phrase a few years ago.

And you've got Italy and cities like Milan, You've got Dubai.

You've got Trump too, with his trunk cards or his golden visas trying to entice the rich to America with you know, the possibility becoming a US citizen quite easily.

How much of these other offers much more attractive than the environment in the UK.

Now, Italy is a really good example.

Actually, this is a sort of a policy for them that's actually it's run through as far as I understand it, it's run almost through like a sort of central government hub.

So it's very systematic and it's very consistent.

You don't have the language in Milan.

You do have to speak Italian all of the time, but I would say it's the closest sort of like for like, And they've got a more attractive regime now that's actually now fifteen years, which is what we previously had for a nonin regime.

But now if you're in Italy you've got fifteen years and in the UK it's four.

I mean, that's a pretty if you're looking at a spreadsheet, it sort of makes sense, and hey, life in Italy isn't that bad, and that this is a crucial thing as well.

You can get around if you go the Milan Malplins if you've ever been there in some holiday as Allegra, you can get around pretty easily, you know, and you can get to London as well.

What are you saying about London's public exactly?

Yeah, and their inheritance tax regime is much more generous, isn't it.

Yeah, that's a crucial one, Allegra.

And I think that from the people that we have heard from on in the city in the sort of nine to twelve months, that this has been a particular acute problem.

It is that inheritance tax aspect that has completely freaked out a generation of people who for whom it is very pertinent.

Yes, in Italy has been very good on that.

And even if you end up living in Italy for let's say twenty to thirty years, you set it down, you have your grand kids there, Well, are you exposed to forty percent?

No?

Not.

I think it's about four percent top of my head, so massively difference.

And just other jurisdiction I'd highlight jurisdictions.

I would say Abu Dabby's done a very good job to buy is pretty strong that in terms of marketing themselves, Abi Dabi has a central government hub agency that actually is really I would say ruling out of the red carpet globally, but I would say they're not blind to the fact that, you know, London's a pretty active market for movements.

So Ben just to kind of try and tie this all together and we do try it on in the city to be somewhat positive.

If you were the Chancellor and you're looking at the numbers that you set out very clearly at the beginning of this odd what would be the smart thing to do to say, Look, I've obviously damaged trust, but I really need you guys to stay.

Guys and girls to stay.

You know, you are GDP critical to what I'm trying to do.

What would you suggest she do with some credibility to actually keep them in London.

The big elephant in the room is the fact that we scrapped our Golden visa regime in twenty twenty two because of we were keen at the time to clean out any Russian money that we didn't think should be here.

Now, that was a big deal and we haven't replaced it since then.

And you mentioned earlier that US President Donald Trump is making a big song and dance about Yeah, the Trump card, the US Golden visa, bring it in.

You know, I'd be looking at that if I was both Racheries and Kirstarmer for that matter.

It's interesting we did report that they were looking at some sort of strategic investor visa and that got a lot of tongues wagging, not just in the know private wealth community, but beyond that.

You know, that's interesting.

I think it's politically defendable for Starle and Reeves.

You know, they came to powers saying they are keen for growth, that's their number one priority.

Well, if you want someone from overseas to invest in Britain's infrastructure, which you know there's a broader economic benefit for that, right from the heighth of the low classes, that's defendable, I would say, and more possible than I would say doing anything wholesale change with the non dom stuff, where they'vehin their colors to the mask, they've said we're going to do this, and if they do anything to change it, then it speaks to you can't trust labor with the economy, you can't trust labor with all of you know, the non domb stuff, and it speaks to the broader issues that made non domsun settled in the first place.

Ben, that's a brilliant place to leave it.

Thank you so much and good luck with your reporting.

Thank you, thanks for listening to this week's In the City from Bloomberg.

This episode was hosted by me alegra Stratton.

In the City is produced by Summersadi and Moses and with sound designed by Blake.

Maple's Brendan Francis new is our executive producer.

Special thanks to Ben Stupples.

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