Out-Law News 1 min. read

Sharp fall in ‘non-doms’ could damage UK economy, says expert


The sudden fall in the number of people claiming non-domiciled (non-dom) status on their tax return "should be a warning sign to the UK government with Brexit around the corner", says Anne Healy-McAdam , a tax expert at Pinsent Masons, the law firm behind Out-law.com.

Statistics released by the UK's HM Revenue & Customs (HMRC) show that there was a 23% fall in the number of individuals claiming non-dom tax status, down from 118,000 in 2015/16 to 91,100 in 2016/17.

Whilst part of that reduction may be from individuals dropping their non-dom tax status, HMRC says that the fall in numbers will also be from non-doms leaving the UK.

“A lot of non-doms have seen the Government’s increasingly aggressive stance taken towards them, and with constant changes to the legislation there is a lack of certainty so they have decided enough is enough,” said Anne Healy-McAdam.

The concept of domicile links individuals to a particular territory as their ‘permanent home’ for the purpose of determining how UK tax law applies to them. It is usually relevant to individuals who were born outside the UK.

In recent years, the UK government has introduced measures making it harder for individuals to claim to be non-UK domiciled, especially when they have been resident in the UK for a significant number of years. 

Since 6 April 2017, an individual who has been UK resident for 15 out of the last 20 years may be deemed to be domiciled in the UK for income tax, capital gains tax and inheritance tax purposes. Those who are deemed to be UK domiciled will not be able to access the favourable remittance basis of taxation, whereby income and gains which are not brought into the UK are not subject to UK tax. A deemed domiciled individual will be subject to UK inheritance tax on their worldwide assets.

“With Brexit fast approaching, the UK will need to encourage as much inward investment as possible. Some non-doms seem to have evaluated the political landscape in the UK and decided that they would be better off being based elsewhere,” Anne Healy-McAdam said.

“UK non-domiciled-tax payers are among the most geographically mobile citizens in the world, and the move by the UK government to tax their global income has made many of them think they can get a better deal elsewhere,” she said.

Non-doms currently pay around £9.4billion in tax and NIC in the UK.

“Non-domiciled tax payers invest large sums of money into the UK and create thousands of jobs through their businesses. There is a real risk that the UK will lose much of this if it continues to encourage non-doms to go elsewhere,” she said.

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