UK Non-Dom Numbers In Decline

By Editorial 19 January, 2011

New figures obtained under a freedom of information request by a UK law firm, McGrigors, have revealed that the number of non-domiciled taxpayers in the UK has declined significantly since the UK government imposed an annual fee on taxpayers with such status in 2008/09, in a move expected to have been detrimental to the UK tax take.

The figures reveal that the number of UK residents claiming non-dom status declined from 139,000 to 123,000 in the year since the introduction of the GBP30,000 remittance basis charge in April 2008. This decline was after significant growth in non-dom numbers in the tax year prior to the levy's introduction.

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. However, under changes brought in by the 2008 Finance Act, taxpayers have to pay a GBP30,000 charge along with any other tax resulting from income declared on their annual tax return to retain non-dom status, but only if they have been resident in the UK for seven out of the last 10 tax years. Non-doms can forgo this charge if their overseas income amounts to less than GBP2,000 per year, or if they opt out of the residence basis of taxation and allow their worldwide income to become taxable in the UK.

While it was considered by many that the charge would not spur a large-scale exodus, in light of the recession it is believed that less affluent high-net-worth individuals will have weighed up the charge as being too sizeable. Phil Berwick, Director at McGrigors said that a lot of taxpayers will have shed their UK non-dom status in exchange for residency in low-tax territories such as Switzerland, Monaco or the Channel Islands.

“[The levy] has still been sufficiently irritating to drive thousands of them overseas,” Berwick said, according to the Daily Telegraph. “Unfortunately many of these HNWIs will have taken the GBP30,000 annual levy as a message that the UK is not such a welcoming home to them. The spending power that has been lost to the UK economy is surely going to be far in excess of the income gained by the Treasury.”

Based on preliminary figures, around 5,400 taxpayers paid the GBP30,000 charge for non-dom status in 2008/09, paying tax of GBP162m in total. Revenue from the charge is expected to have more than doubled in 2009/10.

Tags: Expatriates | Compliance | Tax | Tax Compliance | Law | United Kingdom | Offshore | Tax Breaks | Individual Income Tax |


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