Out-Law News 2 min. read
09 Apr 2015, 10:52 am
Labour leader Ed Milliband announced that his party would prevent new people from claiming non-dom status after April 2016, while those to whom the existing rules have applied for a long time would be given a "short period" in which to adjust their tax affairs. Students, foreign workers and others who are "genuinely resident in the UK on a temporary basis" would remain exempt, according to the plans.
The previous Labour government introduced an annual remittance charge of £30,000 in 2008, payable by people who had been resident in the UK for seven of the previous 10 years but who remained non-domiciled for tax purposes. The current government increased this charge to £50,000 for those who have been in the UK for 12 years or longer, and £90,000 for those who have been in the UK for 17 out of the previous 20 years.
In April 2013, the coalition government introduced an annual tax on enveloped dwellings (ATED) levied on residential properties owned through a company, targeted at wealthy non-doms that buy properties through a company. Originally payable in respect of residential property valued over £2 million, by April 2016 it will be charged on all properties valued over £500,000. From this month, non-residents will also have to pay capital gains tax on gains made on the disposal of UK residential property.
"The uncertainty surrounding the non-dom regime and the constant tinkering is likely to put off some prospective new residents and tip the balance for those already here thinking about leaving," said tax expert David Knight of Pinsent Masons, the law firm behind Out-Law.com.
"Overall it is more likely that financially the UK would be worse off were the regime to be abolished completely," he said.
'Domicile' is a concept distinct from both nationality and place of residence in a given tax year, and effectively means where a taxpayer has his or her permanent home. The rules are complex and defined through a long line of case law. Individuals who come to the UK from other countries will usually have non-dom status unless they intend to live here permanently and indefinitely.
Non-doms that elect to pay the remittance charge do not have to pay UK tax on income and capital gains that are based elsewhere and not brought into the country. They are, however, taxed on income that they generate in the UK. Non-doms can opt out of the levy if they agree to pay UK tax on their worldwide income and gains instead.
Figures obtained by Pinsent Masons in 2014 found that non-domiciled taxpayers are now paying record amounts of tax on income that they generate in the UK. The figures showed an 11% increase in the amount of income tax paid by these individuals over the last three years that records were available at the time, from £5.7 billion in 2008/09 to £6.8bn in 2011/12.