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Labour to scrap non-dom tax status

A Labour government would scrap the non-domicile rule that allows some wealthy UK residents to pay less tax on earnings made outside the country.

In a speech at the University of Warwick later today, Labour leader Ed Miliband will unveil the move as a manifesto pledge, the BBC reports.

He will say: “There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole.”

Speaking on BBC Breakfast, shadow chancellor Ed Balls said the clampdown could raise “hundreds of millions of pounds” but admitted predicting a more concrete figure “is very uncertain because we do not know how much income people have in this country”.

Miliband is expected to argue the majority of non-doms would stay in the UK as there are not many other countries operating a similar system.

The last Labour government looked at abolishing the system, but settled for tightening the rules instead. In the Autumn Statement, the coalition Government announced an annual £90,000 charge for people non-domiciled in the UK for tax purposes but who had lived in the country for 17 of the past 20 years.

An individual’s domicile is usually the country their father considered his permanent home when the individual was born.  UK tax is not paid on foreign income or gains if they are less than £2,000 in the tax year and they are not brought to the UK.

For earnings over £2,000 UK tax can be claimed or claimed on a remittance basis. The latter means you only pay tax on the income or gains brought into the UK but in general you would lose the tax free allowances for income and capital gains tax, and pay an annual charge up to £90,000.

Chelsea football club owner owner Roman Abramovich is a famous example of someone with non-dom status.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. “the non-domicile rule that allows some wealthy UK residents to pay less tax on earnings made outside the country”

    OK. I’ll bite. It really doesn’t.

  2. Ha ha ha ha and People are really going to vote for this Clown

  3. Begs the question of what sort of reputation we want this country to have – one that welcomes the mega rich – lets them benefit from all our services and infrastructure without paying for them whilst giving them the ability to exploit tax loopholes in a similar way to the Cayman Islands and Monaco?

  4. @Smithy

    That’s one opinion. Mine is that Lakshmi Mittal et al, don’t come for the NHS, or the state pension or even the roads or the trains. They come for the rule of law and investment opportunities. They pay what they owe on the un (or under) taxed income remitted to or earned in the UK. On what other basis should they pay?

  5. Well, at least with Labour we now know it’s about soundbite and appealing to the prejudice of the unthinking masses. I gues there’s no point in thinking unless you have to…

    The picture is clearly bigger than tax. When rich people come to this country they spend a lot, employ a lot and bring their friends. What they ‘take’ tends to be in the form of enjoying the culture, certainty (Sam’s point on rule of law) and occasional use of emergency services. There must be more creative ways of making things ‘fairer’ other than bashing people over the head, the politics of envy and dragging people down to make the rest feel better.

  6. Spot on Sam, they are no burden and they employ people who do remit everything to the UK

  7. @Sam last time I looked, the ‘rule of law’ cost money – or have the police and jusdicary system started working voluntarily now?

    @Grey Area – If abolishing an anachronistic rule that was introduced 200 years ago is ‘appealing to the unthinking masses’, then so be it. And I don’t think making people pay the right amount of tax on what they earn in this country (the same as the ‘unthinking masses’ have to do, is ‘bashing them over the head’.

    I really don’t see the problem – if you earn money in this country, then pay tax on it. Most of us manage perfectly well with that simple rule of thumb – why should 100,000 people somehow be different to the rest of us?

  8. @Smithy
    I agree with you but that’s the point isn’t it… the changes mean they will be taxed on income they don’t earn in this country.

    The rule of law is a legal principle, it doesn’t cost any more to uphold just because a non-dom lives here. Indeed, if they go to court to enforce those rights they will spend millions in doing so which benefits the economy.

  9. Don’t non doms pay tax on all remitances, lose allowances, and pay £30k for the priviledge?

    One might debate the levels, but in general I’d have thought that this is a reasonable “take” by HMG, especially as pointed out previously many of these folk will probably under utitlise public services….

  10. Call a spade... 8th April 2015 at 4:20 pm

    @Chipping
    They can choose to pay the remittance charge, in which case they pay tax on income and gains remitted to the UK (but not on any other non-UK income and gains) and don’t get personal allowances. Alternatively they can opt to be taxed like UK doms and pay tax on all their worldwide income and gains. Those who choose the remittance basis obviously do so because it costs them less.

    Whether they under- or over-utilise public services is not the point. UK doms (some of whom also under-utilise public services) are obliged to pay tax on their worldwide income and gains (subject to DTAs). Why should people who live here to all intents and purposes as UK doms be treated differently?

    @ Sam De Zoysa: on what other basis should they pay? The same basis as the rest of us who reside more or less permanently in the UK. Labour isn’t proposing to extend this to those who are here only temporarily.

  11. @call a s

    “Those who choose the remittance basis obviously do so because it costs them less.”

    Agreed – undeniably the case

    “Why should people who live here to all intents and purposes as UK doms be treated differently?”

    Because pragmatically it may well follow the law of diminishing returns. I’m all in favour of HMG getting as much tax in as it can to fund the wider populace’s desire for comfortable living (including my own!) just that I would anticipate using such a blunt intstrument on a category of folk who may well be happy to base themselves elswhere, is unlikely to achieve that aim.

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