In a significant shift prompted by recent changes in tax law, wealthy individuals who have left the United Kingdom are canceling their memberships in exclusive private members clubs. This decision is primarily aimed at preventing HM Revenue & Customs (HMRC) from assuming that they still maintain UK residency, which would subject them to domestic tax obligations.

Legal experts have been advising affluent clients that membership in prestigious clubssuch as Annabels, Soho House, or 5 Hertford Streetcan serve as evidence of strong ties to the UK. For example, Annabels requires an annual membership fee of 3,750, in addition to an initial joining fee of 1,850. Such financial commitments could be interpreted by tax authorities as indications that the members have not completely severed their connections with Britain.

Prominent figures, including steel magnate Lakshmi Mittal, have either already exited the UK or are contemplating doing so, following the recent abolition of the non-domicile (non-dom) tax regime. This longstanding policy allowed individuals who declared abroad as their permanent home to avoid taxation on foreign income and gains while living in the UK.

A former non-dom who recently left the country due to the regime's abolition shared her experience of resigning from both the Arts Club and 5 Hertford Street in Londons affluent Mayfair district, acting on the advice of her attorney. She noted, They dont even like you to be a member of a gym, so anything that shows commitment to something here, even if its not expensive, is taken . . . as evidence of your desire to actually be here. Currently, she divides her time between Greece and Switzerland, having decided to distance herself from her previous life in the UK.

Philip Palumbo, managing director of The Walbrook Club located in the City of London, confirmed that some of his non-dom members had canceled their memberships upon leaving the country. He stated, They have cited membership as evidence of ties to this country, and so theyve had to resign from us. Additionally, Palumbo expressed concern about the broader implications for private clubs in the West End, suggesting that the mass exit of non-doms could significantly affect their business.

In light of these developments, some private members' clubs are exploring strategies to retain their non-dom clientele. Notably, because HMRC imposes a limit of 90 days per year on how long an individual can spend in the UK before being classified as tax-resident, one club has considered the introduction of short-term memberships that would align with this timeframe. According to a source familiar with the discussions, this could provide a viable option for non-doms who wish to maintain some connection without incurring tax liabilities.

Moreover, another club has reportedly experienced an increase in interest from its members seeking to transition their memberships from UK clubs to those located overseas. This trend underscores the shifting landscape for private club memberships as affluent individuals reassess their ties to the UK.

In her October Budget, Chancellor Rachel Reeves affirmed the end of the non-dom status effective April 6th, a move that had originally been proposed by her predecessor, Jeremy Hunt. For those who opt to remain in the UK, their global assets could be subject to a substantial inheritance tax of 40%.

Guidance provided by HMRC for its Statutory Residence Testcrucial in determining an individual's residency status and thus their tax obligationsincludes various factors such as having a spouse or children residing in the UK, holding local utility bills, and membership in clubs, whether sporting, health-related, or social.

Camilla Wallace, a senior partner at the law firm Wedlake Bell, confirmed her role in advising clients to relinquish their club memberships when leaving the UK. She also raised an interesting point regarding the potential tax implications for former non-doms who are members of international clubs that include reciprocal membership agreements in London, questioning how HMRC might interpret such affiliations.