Non doms flee UK tax attack

Tim Wallace
Follow Tim
THE NUMBER of individuals registered as non-domiciled with HM revenue and customs (HMRC) has fallen dramatically in the two years since a new levy was imposed on them, figures revealed yesterday.

Labour chancellor Alistair Darling imposed in 2008 a £30,000 annual charge on “non-doms” who have worked in the UK for more than a few years.

Since 2007-08, the number has fallen from 140,000 to 123,000 in 2008-09 and 118,000 in 2009-10, which law firm McGrigors believes is down to the charge – and could risk losing the government revenue as it drives wealthy residents abroad.

“A lot of the wealthiest non-domiciles are highly mobile – many of them will have taken the £30,000 charge as a signal that they are no longer welcome in the UK,” said McGrigors director Ray McCann.

“The charge was touted as a ‘flea bite’ when it was first mooted – but that flea bite has clearly been sufficiently irritating to drive thousands of non-domiciles overseas.

“With the amount of tax collected from the charge diminishing, there will come a point at which you have to question whether any additional revenue is being raised at all. Non-domiciles often have huge spending power, but if they’re not in the country, they can’t spend or pay tax here.”

The charge is set to be increased to £50,000 in April, which McGrigor believes adds to the anti-business feel of UK tax law, which includes (for now) a 50p top rate of income tax and increasing wealth taxes.

To be registered as a non-dom an individual must be resident in the UK on a temporary basis, usually with a plan to return to the country of their, or their parents’, birth. They can keep their overseas income and capital gains safe from UK taxes by keeping the cash abroad. They pay full UK tax on UK income.

However, HMRC disagrees that the sole reason for non-doms leaving the UK is the £30,000 charge. “Whilst the figures did drop in 2008-9 this is likely to be as a result of the wider financial situation and economic slowdown,” a spokesman said. Many non-doms work or worked in the financial services sector.

Some of the drop may also be explained by people changing status but remaining in the UK. They may have chosen to do so if their non-dom tax advantage was worth less to them than the new £30,000 fee.