Fall in super-rich ‘non-doms’ sees tax receipts fall
The number of super-wealthy UK residents who pay no tax on foreign earnings in Britain has fallen to a record low, causing tax receipts to suffer, HM Revenue and Customs (HMRC) revealed today.
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There were 78,000 non-domiciled taxpayers in Britain last year, down from 98,500 the year earlier, figures showed. The fall meant the tax paid into UK coffers by so-called non-doms fell from £9.5bn to £7.5bn last year.
The majority of non-doms are rich UK residents whose permanent home is outside Britain. For example foreign bankers who work in the City can have non-domiciled status and avoid UK taxes on their income from outside Britain.
HMRC said that of those who stopped using non-dom status, about half switched to domiciled status and continued to pay tax in the UK while half left the British tax system altogether.
Alex Ruffel, partner in the private wealth team at solicitors Irwin Mitchell, said the “number one” factor in the drop in non-dom numbers was new “deemed-domicile” rules.
The rules say UK residents can no longer apply for non-domicile status if they have lived in the UK for 15 out of the last 20 years.
Law firm Pinsent Masons said Brexit uncertainty and the prospect of a Labour government were driving away non-doms.
The firm’s senior tax manager Josie Hills said: “Non-doms are internationally mobile and if the UK is no longer an attractive place for them, then they can easily relocate.”
However, Ruffel said that it was Britons rather than non-doms – who are mostly foreign – that were most worried about a Jeremy Corbyn government.
Non-doms have assets abroad and so have “many other options, they don’t have all their eggs in the English basket,” she said.
“There’s no reason for them to run away now, frankly. I haven’t seen that with clients.”
Another factor in the drop could be the “non-dom levy”, a charge of between £30,000 and £60,000 that comes into force after between seven and 12 years, Ruffel said. She said some non-doms may have chosen to pay tax in the UK or move away rather than face the charge.
Pinsent Masons said the amount brought in by the levy was only £315m last year.
Hills said: “Non-doms make a huge contribution to HM Treasury’s coffers. This small group has contributed £45bn in tax over the last five years.”
“The impacts of falling tax receipts from non-doms may only be felt once it’s too late.”