Labour party leader Ed Miliband said he would remove the ‘non-dom’ tax rule, which means British residents domiciled permanently outside the UK do not have to pay UK tax on their foreign earnings. Any UK earnings, however, are subject to UK tax.
Non-doms who live in the UK do not have to pay anything for the first seven years. After this they must pay an annual fee of £30,000 or pay tax on their overseas income and capital gains. After 12 years the fee increases to £60,000, and after 17 years it jumps to £90,000.
“Arcane”
According to the BBC, Miliband said the existing regime is an “arcane 200-year-old loophole” which is “not very rigorous” and demands little in the way of evidence to prove a citizen is indefinitely domiciled outside of the UK.
Labour’s proposals would mean no one could claim non-dom status from April next year, and those who are currently defined as non-domiciled would have a window of time to alter their tax affairs.
“Mass exodus”
However Mark Pearce, partner on the tax team at law firm Thomas Eggar, said simply abolishing the non-dom rule would be a “disaster” for the UK economy, claiming it would lead to a “mass exodus” of wealth and talent from the UK.
“The rule allows people to come and work in the UK, pay UK tax on their UK earnings but shelter their offshore wealth from UK tax unless that wealth is brought into the UK,” he said. “This would deny the UK millions of pounds of tax that these people currently pay.”
