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Experts warn the taxman could miss out on £6.6bn of non-dom tax revenues from 2017

Oliver Gill
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Under proposed government reforms, non-dom status is set to be removed (Source: Getty)

Experts and politicians have urged the government to reconsider proposals to reform non-dom tax status from next April.

Research released today reveals that the average non-dom pays 10 times the average amount of tax paid by Britons. The worry is that a change in legislation will simply drive non-doms to register themselves abroad, reducing overall collections by the taxman.

“With Brexit on the horizon the Treasury should give serious consideration to delaying further changes to the non-dom regime until there is clear evidence that overall tax receipts are not harmed," said City of London and Westminster MP Mark Field.

Read more: Nearly 40 per cent of non-doms considering leaving UK, says Moore Stephens

The analysis by law firm Pinsent Masons revealed that HM Revenue & Customs (HMRC) collected £6.6bn in tax from non-doms in the year to April 2015. The average income tax paid was £56,589, compared to the average UK taxpayer who paid £5,152.

From April 2017, government reforms mean that long-term non-dom status will cease to exist and any non-dom taxpayer resident in the UK for 15 or more out of the last 20 years will be deemed domiciled for income tax, capital gains tax and inheritance tax purposes.

This could lead to non-dom’s choosing to domicile themselves elsewhere, putting the £6.6bn collected by HMRC under threat in the years to come.

“New York, Hong Kong and other major financial centres are always looking to attract these people, and will be keen to show they can offer a better deal.

“Many non-doms are internationally mobile and will not hesitate to move if the grass looks greener. Dismantling the tax status will do little to keep them here in the UK,” said Fiona Fernie of Pinsent Masons.

Read more: UK firms slam lack of detail in non-dom consultation

Field reflected on the amount of tax paid by non-doms and said more thought needs to be put into the wider reaching consequences of introducing new legislation.

“This research is a timely reminder that the taxing of non-doms issue is not as black and white as some would have the public believe," he said.

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Fernie added that not only do non-doms pay significant amounts of income tax, they also pay large amounts of capital gains and VAT. And their presence in the UK is provides several other benefits.

“As a group, non-doms pay billions in tax and bring huge combined spending power, skills and valuable connections to the UK. Many are highly successful entrepreneurs and businesspeople meaning they establish or invest in UK-based companies, thereby creating thousands of jobs.

“The availability of non-dom status awards the UK a real competitive advantage when it comes to attracting wealthy and talented individuals. Removing or altering it now, especially in the wake of uncertainty generated by Brexit, will mean many look seriously at relocating,” she said.

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