Pinsent Masons, which has offices in Asia, the Gulf and Europe, said the number of non-doms in the UK had fallen by 17% from 140,000 to 116,000 since a £30,000 annual non-dom levy was introduced by the UK government in 2008.
Jason Collins, head of tax at Pinsent Masons, said: “The UK’s tax code is seen as becoming increasingly hostile to high net worths, especially those from overseas. There is a conflict here with the Prime Minister’s promise to roll out the red carpet for wealthy foreigners, and it is also potentially undermining new tax rules introduced in 2012 to attract non-dom investment in UK businesses.
“The non-dom levy is part of a series of measures – both implemented and threatened – including the annual property tax and mansion taxes, the 50/45p tax rate and capital gains tax increases, which are driving highly mobile wealthy individuals from the UK.”
The £30,000 levy applies to all non-doms who have been in the UK for between seven and 12 years. Since April 2012, the levy for non-doms who are in the UK for twelve or more years has been £50,000. Non-doms are able to opt out if they agree to pay UK tax on their worldwide income and gains instead.
Collins added: “Non-doms are more important to the UK economy now than ever before. They have huge spending power, invest in businesses and create jobs. They can’t do this if they aren’t here – and there are plenty of other countries competing to welcome them to their shores.
“Policy on attracting high net worths to the UK is inconsistent. On the one hand we have entrepreneur visas and investor visas trying to boost the numbers of wealthy migrants, but on the other hand, wealthy migrants are being driven away by the non-dom levy and the constant stream of new measures to tax them more heavily, creating lots of uncertainty.”
Pinsent Masons pointed out that the levy has actually only been paid by less than 5% of non-domiciles in each year since it was introduced and last year generated just £168m for the Treasury.
“The threat of the levy is driving high net worths away, but to make matters worse it is not even a significant revenue generator to make up for this,” said Collins.
