Government eyes new levy on non-doms

THE government is considering plans for a fresh crackdown on non-doms, which could see the existing levy extended at the Budget in March.

In April 2008, the Labour government introduced a £30,000 annual charge for non-doms who had been living in the UK for seven years or more.

Non doms are people resident in the UK but not domiciled here, allowing them to avoid paying UK tax on their foreign earnings, although they do pay UK tax on UK earnings.

Treasury sources yesterday confirmed one option under consideration is extending the levy to include non-doms who have been in the UK for less than seven years.

In opposition, chancellor George Osborne proposed a levy of £25,000 on all non-doms regardless of how long they had been UK resident.

However, City A.M. understands the chancellor is mindful of the fact that a higher or more widely applied levy would not raise a significant amount of revenue, suggesting any change in the regime would be politically rather than economically motivated.

One Treasury insider yesterday admitted there were concerns that a higher levy or one that hit more non-doms could dent Britain’s competitiveness by causing an exodus of big-spending millionaires.

Official statistics show that the number of people registered as non-doms in the UK fell for the first time in five years in 2008-09 as the rich fled higher taxes and the credit crunch.

The data, obtained by a freedom of information request, show that there were 139,000 people registered in the UK as non-doms in 2008-2007, but by the next year that figure had fallen by 16,000, or 11.5 per cent.

Experts say that the financial crisis can only account for a small part of the fall, with the majority attributable to the £30,000 annual charge.

Critics warned at the time that the rule changes would lead to an exodus of highly mobile millionaires which would cost the UK economy more than it raised in tax receipts.

The Treasury says that roughly 5,400 people have opted to pay the £30,000 charge instead of leaving, amounting to revenues of £162m.