Ed: I’ll scrap the non-dom status for millionaires

ED MILIBAND will today pledge to scrap the controversial ‘non- dom’ status which allows millionaires to reduce their tax bill.

The non- domicile rule means many of Britain’s richest permanent residents don’t pay tax in the UK on their worldwide income.

Labour will claim the rule, introduced in the 18th century, offends the moral basis of taxation and is wide open to abuse.

But critics will say scrapping the status is another example of Labour’s anti- business agenda, and will spark an exodus of rich investors from London to other European countries or the Far East.

In a speech in Warwick today, Mr Miliband will say that everyone who has made Britain their permanent home should pay full UK tax on all their income and gains.

The non-dom status, which is unique to the UK having been introduced by William Pitt the Younger in the late 18th century, is used by more than 110,000 wealthy people.

Mr Miliband will say non-dom status results from a discredited belief that ‘anything goes for those at the top and that what is good for the rich is always good for Britain’. He will add: ‘There are people who live here in Britain like you and me, work here in Britain, 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.

‘There are now 116,000 nondoms, costing hundreds of millions of pounds to our country – it can no longer be justified, and it makes Britain an offshore tax haven for a few.’

Non- doms pay UK income tax and capital gains tax on their UK income and gains, and whatever income generated overseas they choose to remit to Britain. But those domiciled in the UK have to pay tax on all their income and gains, wherever in the world they are made.

George Osborne has launched a crackdown on the system by increasing the annual fees levied on those granted the status. But Labour says this is not enough, and that the system is full of anomalies. For example, some people have been able to claim the status because they once worked abroad, even though they are British-born.

Mr Miliband will say the change will raise hundreds of millions of pounds, and he will dismiss criticism the rule change will lead to entrepreneurs leaving the country.

However, last night Labour was careful not to give precise figures because the numbers taking advantage of the rule, and the value to them, is a matter of dispute.

It is said non-doms still pay huge sums to the Treasury, even as much as £132,000 per person per year on average, and abolition will simply lead to a long-term fall in revenue.

But Mr Miliband will pledge to abolish it from April 2016.

Labour will stress that foreigners in the UK for a genuine temporary short period will be able to retain non-dom status. The party intends to consult on the length of that period if it wins the election.

Richard Murphy, a left- ofcentre tax expert, has suggested that the grace period could amount to five years, arguing that, without such a time frame, foreigners could be subject to being taxed in two jurisdictions, including their permanent place of residence overseas.

The previous Labour government allowed the number of non- doms to swell until it introduced a rule in 2008 requiring non-doms to pay an annual fee.

Mr Miliband, aware that some Labour Party donors are nondoms, will also add: ‘I don’t blame people for taking advantage of non- dom status. I blame governments for fostering a system that can be taken advantage of.

‘The correct belief in enterprise and wealth has become distorted into an idea that wealth only flows from a few at the top – and they are so important that they should be allowed to operate under different rules.

‘We all use the same roads, we are all protected by our police and Armed Forces, even those who go private sometimes rely on the NHS. It is the common good. We use these same services, therefore we all owe obligations to help fund them according to our ability to do so.’

Lib Dem Business Secretary Vince Cable also favours scrapping the non-dom status.

‘Operate under different rules’