UK 'Non-Dom' Numbers Decline

By Editorial 24 May, 2011

The UK has seen a significant fall in numbers registering for non-domiciled status, as the introduction of an annual levy and changes to inheritance tax laws bite, according to the chartered accountancy firm Midgley Snelling.

However, in spite of a 16,000 drop since the introduction in 2008 of a GBP30,000 levy on those "non-doms" residing in the UK for more than seven years, non-doms are seen to have had it relatively easy recently. George Osborne's March Budget in particular is cited as an instance at which the government chose not to clamp down further on non-doms.

UK 'Non-dom' status is typically claimed by those born outside of the UK but who are long-term residents of the country. It means that while they pay tax on their UK earnings, their foreign earnings are not subject to UK tax as long as it remains offshore.

Midgley Snelling describe the Budget as offering a gentle approach to non-doms, who could breath a sigh of relief at the Chancellor's announcement that he would inflict no further substantive changes on them during the remainder of the current parliament, due to dissolve in 2015.

Indeed, Osborne offered non-doms an almost quid pro quo arrangement, designed, he said, to end the uncertainty surrounding their taxation, arguing that while they remain welcome in the UK, they must "pay something in return for their special tax status".

He extended the remit of the levy imposed under the previous government, increasing the charge to GBP50,000 and imposing it on those resident for 12 years.

In return, Osborne lifted the tax charge applicable when non-doms remit foreign income or capital gains to the UK for the purpose of investing in a British business.

This, Midgley Snelling expects, will boost the appeal of London as a place of residence. Managing Partner Robin Sewell said that: "Non-doms can breathe a sigh of relief that they escaped a full-blown government crackdown at this year’s Budget. Even though the levy has been raised for long-term residents, they will receive a tax break on any funds that are put into British business".

However, it is seen as regrettable that no significant changes were made to inheritance tax laws, which, Sewell argues, could have encouraged more to declare their UK tax status.

Sewell noted that: “Previous changes to the inheritance tax laws have led to many non-doms changing their status to become domiciled, or simply leaving the UK altogether. Until recently, married couple and civil partners were incorporated in the established inheritance tax charges. However, UK law now exempts husbands and wives and civil partners from inheritance tax, but this does not extend to include non-doms.”

Tags: Individuals | Expatriates | Inheritance Tax | Tax | Investment | Tax Avoidance | Tax Incentives | Law | United Kingdom | Offshore | Individual Income Tax |


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