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.