UK to keep ‘non dom’ tax status
HUNT DENIES PROTECTING THE WEALTHY WHILE LABOUR VOWS TO END ‘BROKEN, OUTDATED SYSTEM’
THE chancellor, Jeremy Hunt, has indicated that a Conservative government will retain non-domiciled (‘non-dom’) tax status for wealthy foreigners, even though the Labour party has raised the issue as a way of attacking prime minister Rishi Sunak through his wife, Akshata Murty.
This is because the Treasury believes that scrapping the tax status for non doms, who pay £30,000 a year to avoid being taxed on their earnings outside the UK, does not make economic sense and may do more harm than good.
Those who have lived in the country for 12 of the last 14 tax years have to pay £60,000 a year. UK residents must pay taxes on their global income once they have resided in the country for 15 of the last 20 years.
Labour has targeted Murty, who has shares in Indian IT major Infosys, given to her by her father and the company’s co-founder, NR Narayana Murthy. They are worth over £700 million and earn her dividends of about £12m a year.
In Eastern Eye’s Asian Rich List 2022, Sunak and Murty are a new entry at number 17, valued at £790m.
Paying £30,000 a year gives Murty nondom tax status in the UK, so she does not have to pay tax on her Indian earnings unless they are repatriated to the UK. She continues to pay tax on her income in Britain, like everyone else.
However, she has volunteered to pay tax on her Indian earnings, but it is not known whether she has also given up her non-dom status.
Hunt told the BBC last week that he wanted foreigners to “spend money in Britain” as that supported jobs here.
Questioned about whether he had asked the Treasury to look into how much revenue abolishing the non-dom tax status could bring in for the government, Hunt said he was “constantly” looking at such measures, but tried to “avoid damaging long-term growth”.
He added the Treasury was “unsure” about the real savings that abolishing the non-dom tax status would bring, and that they did not give a figure at all.
“The Treasury did not tell me it would help the economy to do this,” he said, and such a measure would “damage the long-term attractiveness of the UK”.
Hunt confirmed he did not think abolishing the non-dom tax status would make sense economically, even though it may be a good thing politically.
He denied he was protecting wealthy people (like the prime minister’s wife): “In the end, sound money matters more than low taxes.”
The Labour party has committed itself to abolishing non-dom tax status. Shadow chancellor Rachel Reeves said it “simply isn’t right that those at the top can benefit from outdated non-dom tax perks” while ordinary people struggle with tax rises and the cost of living crisis.
She said Labour was sending “a clear message” to the global super-rich: “If you make your home in Britain, you should pay tax here – on all of your income.” “With Labour, people who make the UK their home will contribute to this country by paying tax on their global income,” Reeves said.
She added that Labour would replace the non-dom status – which was introduced under King George III in 1799 when Britain was fighting France – with a modern scheme for those who are “genuinely living in the UK for short periods to allow us to continue to attract top international talent”. Labour said it would consult widely on how its new “temporary resident tax regime” would work, but said that any tax advantages would be likely to expire after five years, compared with up to 15 years under the current system.
The party added that its plan would finally “put an end to the broken 200-yearold system that lets people dodge millions in tax, and bring our rules into line with those of systems similar to other major economies such as France, Germany and Canada”.
It is estimated that scrapping the system will bring in an extra £1 billion, but others calculate this has to be offset against losses which might be much larger.
The number of people who have claimed non-dom status in the UK rose from 162,000 in 2001 to 238,000 in 2018, according to a study by the London School of Economics and the University of Warwick.
When Gordon Brown was chancellor, he used his 2002 budget to announce a review of non-dom rules, but he decided ultimately not to change them.
In 2010, new rules were brought in as part of the Constitutional Reform and Governance Act to prevent non-doms from sitting in the House of Lords.
As a result, the late Raj Kumar Bagri, who set up Metdist, the metals trading company, and was a former chairman of the London Metal Exchange, was one of five peers who left the Lords. He had taken his seat on the Tory benches when he was made a life peer in 1997.
In contrast, Lord Swraj Paul gave up his non-dom status in order to retain his seat in the Lords.
The late “curry king”, Sir Gulam Noon, also gave up his non-dom status a year before he was given a peerage in 2011.
According to an analysis of the subject, “a person registered as a non-resident with HM Revenue and Customs is a UK tax resident, but is not required to pay UK tax on income and capital gains abroad – including on the company’s shares or cash from the sale of a second home – unless they bring their money into the UK or deposit it in a UK bank account.
“However, non-doms still have to pay taxes on money earned in the UK. A person with non-domicile status, sometimes referred to as a ‘non-dom’, is a person living in the UK who is considered a resident (ie, a permanent resident) under UK law. Non-doms pay UK taxes to the government, like all UK residents. Tax status depends on residence and domicile; nationality is irrelevant. A British citizen who has established permanent residence abroad may reside in the UK for a certain period of time and be taxed as a non-resident.”