The law firm McGrigors says the Government should consider dropping plans to increase the annual charge for non-doms to exempt their global earnings from UK taxes in light of diminishing returns from the levy.
In April 2008, Labour introduced a £30,000 annual levy for non-doms who want to keep worldwide earnings outside of the UK tax system once they have been resident in the UK for longer than seven years. In Wednesday’s Budget, the Chancellor is expected to confirm the levy will be increased to £50,000 after 12 years residency.
Freedom of information figures obtained by the law firm McGrigors show the number of non-doms in the UK has fallen 16 per cent since the levy was introduced. In 2007/08, there were 140,000 non-doms, that figure fell to 123,000 in 2008/09 then to 118,000 in 2009/10.
Just 5,100 of the 118,000 non doms in 2009-10 paid a £30,000 levy for continued exemption of their worldwide earnings from UK tax after seven years residency. In 2008/09 that figure was 5,410. Revenue from the levy fell from £162m to £153m in the same period, a drop of almost 6 per cent.
McGrigors director Ray McCann says: “The charge is already producing a diminishing return for the Treasury. An even smaller proportion of non-domiciles are likely to pay the £50,000. For the vast majority it simply will not be worth their while.”
McGrigors said few pay the levy because they do not earn enough to make it worthwhile. The firm blamed lay-offs at non-dom heavy investment banks, changing investment strategies and concern HMRC is going after non-doms for the fall in numbers.
McCann says: “Most non-domiciles are not Russian oligarchs. They are usually professionals with little or no income outside the UK and therefore little reason to pay the charge. With the charge, 50p tax rate and threat of a mansion tax and a tycoon tax, there is a growing feeling among non-domiciles that they are not particularly welcome in the UK. Meanwhile, other international cities like Singapore are willing to welcome them with open arms.”