How much might we raise if we restrict non-dom status?

In a series of blog posts pre-dating that FT editorial, I argued that the non-dom rule is an unsightly bribe to those with some foreign connection to come to or remain in the UK; that the structure of the remittance basis (which taxes income and capital gains brought into the UK but not those left outside) discourages the very thing (inward investment) that we should want to encourage; that establishing someone’s non-domicile status is incredibly difficult – a fact which may be responsible for the fact that in the last decade HMRC have only taken one domicile case to the Tribunal; and I also asked why, if the introduction of the remittance basis charge didn’t reduce the number of registered non-doms, it should be thought that abolition of the remittance basis should cause the sky to fall in.

I also advanced a policy suggestion:


But what I want to look at here is the prospective yield from certain changes to the non-dom rule proposed today by the Labour Party.


What proponents of the remittance basis of taxation for non-doms say is this: yes, we know it’s unfair that those with some happenstance foreign connection should pay less UK income tax and capital gains tax than those who are UK resident through and through. But unless we lower their tax bills, they’ll leave and take such tax as they pay with them.

You need to start with that statement because, embedded within it, is a rather startling argument: that it doesn’t matter if a tax result is unfair, so long as it increases yield. This is the logic of a fiscal dutch auction: that we should offer foreigners a lower and lower income tax bill until they agree to move (or stay) here. Whilst this approach will have enthusiastic supporters – not least as Charles Walker MP (Con) has pointed out, high end estate agents – it’s not a proposition many of us would find palatable. Not even Deloitte who noted, rather drily, and of the increase to the remittance basis charge in the 2014 Autumn Statement:


It’s important not to forget this. Proposals to reform non-dom status must, of course, have regard to yield – but not only to yield. Fairness too.

Everyone will place their own subjective value on fairness in the tax system – I’ll leave that to the politicians and the voters. But what I want to do is examine the available data on yield.


Calculating the yield to Treasury from changes to the tax regime is typically a two stage process. Stage one is to calculate the theoretical yield: if things remained the same, what would the extra measure raise (or cost)? Stage two is then to factor in the ‘behavioural effects’: i.e. how people will adjust their behaviour in light of the changed regime.

To take an example, if you reduced the duty on fuel by 30% you wouldn’t expect this to cost you 30% of your present rake. Fuel consumption would go up and so, although you’d now only get 70%, it would be 70% of a larger pot. The same is true of tax rises: it’s behavioural effects that enable Labour to say that cutting the top rate of income tax from 50% to 45% was a £3bn tax cut for the highest earners; and the Tories to say ‘but it only cost Treasury £100m’. People change their behaviour when circumstances change.

On the cut to the additional rate of tax, stage one was unproblematic. We knew how many people were liable to the “additional rate” of income tax and what they earned. What we were less clear on was stage two – how they would change their behaviour in light of increasing it to 50% – a question which formed the subject of this lengthy Treasury report.

But when you calculate the yield from changes to non-dom status you have a further difficulty. It’s not merely that you don’t know what the behavioural effects will be. It’s also that, as I observed here, we don’t collect data on the income and capital gains enjoyed by non-doms and not remitted to the UK. So you have a stage one difficulty as well. These difficulties led even the IFS to observe back in 2007 (about the effects of rival political proposals for the remittance basis charge) that no-one knows what the yield might be.

There are, however, a few propositions from which one might, cautiously, proceed.

(1) As to the size of the theoretical yield, the only data we have on the amount of unremitted gains shows average foreign earnings not remitted of £50,000. This average is drawn from a data set of 17,000 who voluntarily chose to disclose this information. However, this average is likely considerably to understate the theoretical yield. As it seems to me, the higher your unremitted gains the lower the prospect that you will voluntarily disclose them to HMRC – because disclosing high unremitted income or gains would invite close scrutiny of your entitlement to the remittance basis. Moreover, this figure looks to be just unremitted income – ignoring unremitted capital gains.

  • If you assume 50,000 people claiming the remittance basis each with £50,000 of unremitted income – and conservatively no gains – the theoretical yield would be 50,000 x £50,000 x 47% (including 2% Class 4 NICS) = £1.175bn per annum.
  • If, for the sake of argument, you assume 17,000 with an average of £50,000, 17,000 with an average of £100,000 and 16,000 with an average of £250,000 and again ignored capital gains the theoretical yield would be £3.1bn.
  • If you take the figures at the second bullet point above and also assumed average capital gains of 50% of income taxed at 28% the theoretical yield would be £4bn per annum.

(2) As to behavioural effects, we’ve introduced a number of measures of late that have rendered the UK less tax-attractive for non-doms: not merely the remittance basis charge (and increases to it) but also the annual tax on enveloped dwellings, a series of measures widening the scope of what constitutes a remittance and the forfeiting of the personal allowance from income tax and annual exempt amount from capital gains tax. I’ve looked at some historical data here but as I read it, it shows a gently rising trend of non-doms in the UK. Whilst these measures might (on one view) have effected a short term interruption to the trend, the trend remains in place. Contrary to the warnings of many, and as Charles Walker rightly predicted, the changes have not caused the sky to fall in.

Looking forward, there is good reason to believe the trend might even strengthen. For example, as the Telegraph has reported, there has been a 69% increase in the number of applications for investor visas in the UK from Russians.

This – it seems to me – provides powerful support for the proposition that one should not over-estimate behavioural effects in calculating the likely yield.

(3) Further support for not overstating behavioural effects comes from looking at the yield calculations for earlier restrictions to the remittance basis charge.

The introduction of the remittance basis charge in 2008 generated a yield in the hundreds of millions of pounds (figures of £800m and £500m were given – see page 164 – but with only limited detail). The Budget 2011 increase in the size of the charge generated a median yield of £70m (see page 36 which went on to observe, inaccurately as it transpired: “There will be no other substantive changes to these rules for the remainder of this Parliament”). And the increase in the remittance basis charge in the Autumn Statement 2014 generated a steady state yield of £90m (made up of a £120m theoretical yield reduced by 25% for behavioural effects – see page 41).

If you have three data points, each demonstrating a positive yield from a restriction to the non-dom basis, it becomes quite difficult to contend that the behavioural consequences of a fourth such restriction will be such as to swamp the theoretical yield.

(4) If you proceed from that relatively modest evidential base and assume a 25% reduction due to behavioural effects (as Treasury did in 2014), then the annual yield numbers at (2) above become £880m per annum; £2.325bn per annum; and £3bn per annum. Other reductions for different behavioural effects can be relatively easily calculated.


Ultimately – and again leaving aside questions of basic tax fairness – a good change to the remittance basis is one which constrains the likelihood of huge behavioural effects. To analyse the likelihood of big behavioural effects from any particular measure what, it seems to me, you need to do is look at two groups of people: prospective immigrants to the UK and prospective emigrees from the UK.

As to prospective immigrants, what’s attractive about Labour’s proposal is that it gives people a decent period in the UK to enjoy the remittance basis. Long enough to put down roots by buying property, forming social networks, putting their children into local schools, and so on, such that they might be disinclined to leave when the incentive lapses.

And as to prospective emigrees, the data analysed above suggests that, whilst some will leave, one shouldn’t expect too many to do so. This cautionary tale – of the hugely deleterious effects on Guy Hands of his ceasing to be UK resident – might explain why.


If I proceed from the above and stick a finger in the air – an exercise that you’ll have to take it from me is not so dissimilar to that which Treasury does when it forecasts the effects of tax measures – where do I get to in terms of yield? I’m not an economist – and the data is poor. But my instinct is that the stage one theoretical yield figures will tend towards the top end – towards the £4bn end – of the spectrum. But I also think 25% is rather low as a behavioural effect: 50% or even more might well be more realistic, depending on the detail of Labour’s measures. But that would still leave a yield well north of £1bn.

51 thoughts on “How much might we raise if we restrict non-dom status?

  1. Pingback: Tax Research UK » How much will the change in the domicile rule raise in tax?

  2. Like you I have no idea of the numbers involved. But one factor you’ve missed is the knock on effects of the behavioural changes. A second is whether they actually have any significant income / gains.

    So, for example, a super-wealthy non-dom decides that they prefer looking at mountains and chooses to go to Switzerland. Now they don’t need their UK driver, their UK security, their UK cleaner, their UK lawyer, their London office. Their partner doesn’t buy the Lambourgini or the matching suitcases and One Direction doesn’t sing at their daughter’s birthday party anymore. Each of these changes will have an influence on the amount of PAYE/NIC/VAT paid. My guess from what I’ve reading Heat is that the amounts are likely to be substantially and so reduce the yield.

    On the second point, you’ve also assumed its employment / trading income. With the super-wealthy, my guess is that it is likely not to be. The big gains/income may well be realised by their family companies and so the individual won’t actually receive anything other than spending money. If so, the tax yield will again be less.

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  4. That is right – the domicile rule has historically been maintained, not because of fears that the yield from abolishing it would be low, but because of the belief that there would be a large negative multiplier effect (i.e. non-doms leaving/not arriving and therefore a loss of demand in the UK economy).

    Presumably an economist could have a stab at quantifying this?

    If Osborne is even half awake he will raise the point, although many will feel the numbers are irrelevant to what is a basic question of fairness.

  5. Jolyon would you be able to confirm or otherwise whether you are formally assisting with policy?

  6. I’ve made policy proposals to both Tories and Labour. Some of them have become policy or law. I made policy proposals on this to Labour… But I hold no Labour office.

  7. These are the points which I think are important. It is of course impossible to estimate the behavioural aspects but it must be attempted if a reasonable policy is to be developed.

    Obviously some will leave (irrespective of what Murphy thinks). The question is how many and what will be the impact on their broader economic contribution? What will be the impact of SDLT revenues, Employment of UK residents as drivers, cleaners, lawyers etc?

    How much of a drain on the UK economy is a HNWI non-dom? The majority won’t be using public transport regularly, sending their children to state school or using the NHS.

    There is much more to this than just tax revenue raised.

  8. I don’t really disagree with any of that. But I would add that fairness is important to. It must be pretty galling for those in the shires and earn high incomes to live with a higher tax burden than that which wealthy non-doms (who might be indistinguishable in every material way from them) pay.

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  10. I do agree that fairness is important but I also think that many consider the wider economic implications rather than the view that Mr X down the road pays less tax than me and that’s unfair.

    Personally, I would welcome an individual who moved to the country and was a net contributor, even if they paid less tax than me; I would rather have that contribution than not. Again though the question is would that individual have come to the UK if the non-dom rules didn’t exist?

    For these reasons, I believe the wider economic analysis is incredibly important and, whilst difficult, must be attempted.

    I do think that the mechanism is open to abuse and a more thoughtful approach should be taken (beyond what appears to be being proposed, which is akin to the old not ordinarily resident rules); removing the rules entirely is throwing the baby out with the bathwater.

  11. I absolutely agree that – as I said in my post – what we need is something that minimises behavioural effects on theoretical yield. A well designed change is one that achieves that end.

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  14. I’m curious on one point in your calculation and that is the CGT point. I really don’t know many people who have regular capital gains equalling half their income. Do you?

    And why would someone sell an asset to release capital that they didn’t need (if they needed it they would be remitting it so it would have been taxed under the old rules anyway) if that results in a tax bill they could easily avoid by simply not selling the asset?

    OK it’s only a billion or so but my experience of politicians is that if you tell them a billion extra tax is coming their way, they’ve spent it long before it actually arrives…and sometimes it never arrives.

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  22. I was born in the UK and lived and worked there for many years – paying all taxes in the UK. 5 years ago I moved to another country, and now pay my taxes there. I’m currently accumulating a fairly modest amount of assets in that country (a flat and a small pension fund) – paid for out of my overseas salary, post tax.

    When I inevitably move back to the UK, I will most likely rent the foreign flat out – and will receive income from it.

    What is the justification for the UK taxing these assets I hold offshore, which have been paid for in taxed offshore earnings, and have no relation to my status as a UK citizen other than my passport? There is certainly no economic claim, and were I to move back to the UK my full UK earnings would be taxable in the UK. So what is it? Allowing for dual taxation treaties, what right does the UK government hold on economic activity outside UK borders?

    My feeling is that is simply another Labour policy targeted at a group easy to label as “nasty” in the same bracket as tax-avoiders (and since when was that illegal) and is a naked attack on wealth and entrepreneurship. I also fear that when the policy fails to raise revenues, and forces those who can move away, it will become the first step on a slippery slope towards a passport tax – something that is easier to define and therefore an easier political weapon to wield.

  23. Jolyon

    The only ‘independent expert’ worth their salt who could have given evidence to Labour is your good self. As your advice is properly measured and hedged, aren’t some of the claims being made today by Ed Balls going to be difficult to sustain?
    To remind you of where I’m coming from:
    1. Yes, it is inherently unfair; I called it a bribe.
    2. Yes, it does need major reform.
    That said, unimpressed doesn’t begin to describe my feelings about the quality of Lanour’s proposals. You are right to downplay your input.

  24. To add:

    On my potential return to the UK I would likely be lucky enough to earn In the 40% tax bracket. My overseas investments would give me a small income there – but only enough to just enter the 20% tax bracket (both countries have very similar tax rates and bands, just by chance).

    On my move back to the UK, my overseas income would now be taxed at UK rates after withdrawing some for dual taxation. For my purposes – 40%.

    Having done a quick calculation, it would now be worth my financial while to pay the lawyers and accountants to set up a structure where neither government – UK or the one of the country where I live – will receive as much tax, and that money will never be repatriated to the UK. My other option of course is simply never to return to the UK long term.

    In my case, the financials are pretty small – but still relevant. Now think what Lakshmi Mittal must be thinking….

  25. I think there might be a whole in your analysis of the numbers. The remittance charge would have had three possible consequences on non-doms. The non-dom leaves; the non-dom pays the charge; the non-dom pays the tax on the income. So relying as you do in (1) on 2005-6 data to get to the result is a mistake – some may have left, or, more importantly, some will have simply decided to pay tax as normal. Nobody earning £50,000 a year on non-remitted income is going to pay £30,000 for the remittance basis charge – because the tax at 47% on that is £23,500. Those charges have gone up – in some cases nearly doubled.

    We know that there are about 5,000 people who pay the charge now (see FT today). That means the remainder are paying tax – or are here too temporarily. The latter will remain in effect.

    To make paying that worthwhile, you need to earn at least £127,659 (with the £60,000 charge) or £191,489 (with the 90,000 charge). Then the charge equates to a 47% tax payment.

    Assume that they are each earning £100,000 above that amount (on average, across the 5,000 people) – i.e. their offshore earnings are £227,659 or £291,489 per annum on which they currently pay the charge of £60,000 or £90,000. That means you raise £235 million (not billion) in addition to the current charge. Accounting for a 25% behavioural change, that reduces the amount raised to £176 million.

    You’ve been quoted by the Guardian as saying that this would raise “well north of £1 billion”. But to do that, each of the people paying the current charge would have to have each earn £567,375 which they don’t pay tax on at 47% – which translates into total offshore earnings of £627,375 or £657,375. These are mean averages – which will be drastically distorted by the very, very few supremely rich people who make this outside of the UK.

    If we double the tax raised from removing the charge to £2 billion (to be well north of £1 billion), then the amount of offshore income required on average to £1,194,751 and £1,224,751 per annum. In the latest data I could find easily, there are only 6,000 people paying tax on income of more than £1m. So to raise that amount, you would double the number of taxpayers paying tax at more than £1m. That’s a lot of extra people.

    Have I gone wrong somewhere? If not, then my finger in the air would be £200m in addition to the tax charge. Useful, but nothing like what you’ve been quoted at. Probably a bit fairer.

    (An anonymous tax lawyer.)

  26. Ooops – “hole” not “whole”…

  27. A naked attack on wealth and entrepreneurship might be exactly what responsible economics needs, when done simultaneously in every jurisdiction on the planet. If you stop using rhetoric to decry this, what factual conclusions can you come to?

  28. A lot of unremitted income is capital in nature – it’s not so much the selling of physical assets, but rather investments which has been structured to provide a capital return rather than an income return.

    e.g. If you invest in a hedge fund, the fund generally retains all of the income it receives (so you don’t get taxed on interest, dividends etc). When you are ready to divest, the fund buys back your interest, which is taxed as a capital gain.

  29. Simple maths. There are only about 6,000 people for whom it currently makes sense to pay £30,000 or more each year to access the remittance basis. In broad terms, the proposed changes will not affect the more non-domiciled individuals resident here for 6 years or less, who do not pay the charge, or the many others who don’t pay the charge and will continue to pay full UK tax on their modest foreign income.

    To get an extra £1 billion from those 6,000 people, you need each one to pay £166,667 more in tax on average (or about £370,000 more of taxable income each, assuming a 45% tax rate, and ignoring double tax relief). No doubt there is a long tail of exceptionally wealthy people who distort the mean, but it will not take many of them deciding to spend more time in Switzerland or Singapore or the Bahamas (to avoid them becoming resident in the UK in the first place) to blow the figures for the direct tax take out of the water. Spending less time in the UK, they will also probably spend less money here, with consequent impact on VAT receipts, and income taxes paid by the people that they employ or engage in the UK.

    The remittance basis is a historical accident, and we would not introduce it now if we were starting with a clean sheet, but the concept of domicile is a well-known aspect of private international law and hardly “arcane”.

    Are there any plans to change the 17 year deemed domicile rule for inheritance tax? If “fairness” is the reason for making a change here, what about UK domiciliaries who spend more than 5 (or 17) years outside the UK? Surely fairness demands equivalent rules about “deemed non-domicile”?

  30. That’s fine, if that’s what you want, but don’t pretend for a second it’s about economics. It’s about political power and redistribution.

    You yourself acknowledge the problem – the only way you can “fairly” solve the situation is by global tax harmonisation – which I hope we can all agree is not going to happen soon. But then you attack my point as rhetoric, when in reality I asked a very simple question.

    Again. What is the justification for taxing my offshore earnings in the UK, when the money earned to buy those investments has already been taxed by the relevant offshore authority, any further income from those investments will also be taxed in the country of economic origin, and the UK has no economic involvement in any part of the transaction or investment, apart from through my passport?

    Or another example. Mittal built a massive business in India. Any earnings from that business are taxed in India. Mittal himself moves to the UK, and pays UK taxes on his UK income and any money he brings into the UK. What right does HMRC have to tax the earnings or income of that Indian business? Surely that is for India to be doing, given the economic activity is there?

    Applying what is effectively global taxation is simply not good economic policy. At best, it forces people to move offshore, robbing the vacated country of tax revenues. At worst, it robs that country of inward investment. We don’t have to look far to see this in action. The US does this to their companies. The result? Offshore earning by US companies are almost always left offshore, robbing the US of investment AND tax revenues. So much so that tax inversion takeover deals became common, till Obama tried to block them.

    So is this really sensible policy?

  31. Noate a lot of the pingbacks above quoting the same anti-Jolyon article, on blogs with the same format, each with similar formats to their usernames.

    Is somebody using bots to attack Jolyon? That must be a really weird feeling.

  32. The tax system is awash with rules which could be deemed as ‘unfair’ as the non-dom rules. The same amount of money can be taxed and NI’d in different ways so that different individuals keep more or less of that money, be it self-employed income, employed income, dividend income, capital gains and so on.

    Companies can claim R&D tax credits, individuals and partnerships doing exactly the same thing cannot.

    An LLP with a company as a member can’t claim Annual Investment Allowance.

    If I sell an asset at a gain then that gain is taxed at a different rate depending on my income but if I sell that asset at a loss i can’t deduct the loss from my income.

    There are usually (but not always) good reasons for the perceived ‘unfairness’

    If you start with the rational of the non-dom rules as being “hey Mr Rich Foreigner, come and live in the UK and we won’t tax the income you make outside the UK as long as you don’t bring it into the UK” then it makes perfect sense. If someone comes who otherwise wouldn’t have then the UK can only benefit.

    So Mr Rich Foreigner has come and lived here and we are now saying that the rules which encouraged him to move here are ‘unfair’ and are to be scrapped and we are relying on there being too much personal inertia for Mr Foreigner to up sticks and leave, so we can tax him on income we said we wouldn’t tax him on.

    Quite honestly that doesn’t seem fair.

  33. “Quite honestly that doesn’t seem fair”

    Ah, but perhaps there are good reasons for that perceived unfairness!

    All tax rules are subject to change – nobody was made a promise that they would be immune from law changes (this isn’t Luxembourg, after all). If you apply a principle of “we can’t change any tax law unless nobody has ever factored its existence into a commercial or personal decision” then we’d still be on the medieval tax system.

    Your argument that we want rich foreigners to come here could easily be extended to “we want rich Brits to stay”. Why don’t we give them non-dom tax treatment? Why not offer, say, British formula 1 drivers non-dom treatment so they don’t move to Monaco? Why not give every Brit with a phd non-dom treatment so they don’t move to the US?

    The point is that you have to draw a line somewhere. Domicile is a terrible line – it’s such a grey area that it’s nearly impossible to police. Replacing it with a brightline test is long overdue.

  34. I agree with Tom’s analysis and figures to an extent. But…

    Accepted that around 6,000 pay the Remittance Basis Charge. However what was overlooked in Tom’s analysis was that the RBC applies only to non-doms who have been tax resident for at least 7 out of the previous 9 years. So there will be a significant number – quite possibly swamping the 6,000 – who will have been resident for between 4 and 7 years and therefore currently access the remittance basis without charge.

    The Labour proposal is to allow a temporary grace period of around 3 years for new arrivers who will be able to use the remittance basis. (I think this pretty much already applies for earnings anyway under the residence rules on overseas workdays). Those 4-7 year residents, who are currently paying nothing to obtain the non-dom benefits will have to pay up or leave.

    Difficult to put figures on how much extra this might raise, but I think the consultation before legislation would probably have to focus on the duration of the grace period.

    (Another anonymous tax lawyer)

  35. I think there’s around 50000 taxed on the remittance basis and around 5000 who pay the RBC…

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  37. Frank – entirely true. Labour are proposing to consult on the sub-7 year period – so the betting seems to be between 4 and 5 years at present.

    But I’ve also not estimated some other things:

    1. We give a unilateral tax credit on foreign income. So the 47% number is too high.

    2. Behaviour change at 25% is way too low for the UHNWI – it will be much higher. There are 6,000 in Switzerland who benefit from the forfait system (i.e. the Swiss non-doms). If Jolyon is remotely right, then he will be very busy helping people structure around it.

    3. Zero knock on effects for payments to UK suppliers (which then pay tax etc).

    My own view, having been doing this for 20 years, working closely with some major non-doms, is that this will cost us as a country big time. All the way from lower stamp duty receipts, through to lower tax takes, through to lower spending.

    But I also accept that the rules make no sense (much like potentially exempt transfers for IHT for example). Or indeed the tax rate on IHT.

  38. Any source for the 50,000?

  39. There is a gap in all the analysis on here Jolyon which is the effect of foreign tax credits. The income in question is, a priori, foreign source therefore much of it is likely to be eligible for some form of relief for any foreign tax paid, either by operation of a DTC with the country of source, or by the unilateral credit provisions in (for example) ITEPA. The real yield will be the income and gains currently sitting untaxed (for example in tax havens) or the incremental UK tax due over and above any source country withholding tax (I.e. a smaller sum and taxed at a rate lower than 47%.)

    Basing yield estimates on the current charge is equally misleading. That is a round sum ‘admission charge’ to the remittance basis that thereby discourages further inward investment (as commented elsewhere). It is only a very crude proxy for the level of income (I.e. > 1/47%) that is being sheltered from UK tax.

  40. Foi request to HMRC

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  42. Those Russians and all tbe rest of them are here for many more reasons than the non dom thing. London is a safe haven for capital.

  43. As a non lawyer, dealing with ordinary (rather than wealthy) non-doms at the coal face, I will just add my practical experience. In a small rural accountancy practice I have quite a few non-dom clients. The Italian wife of a UK farmer, a retired polo player are two simple examples. For many at this level, the non-dom charge is not in issue; they pay UK tax on their worldwide income, which produces an extremely modest tax uplift (if any) once double tax relief is factored in. The option to pay the charge presents itself only when there is a windfall year, and is based on the simple calculation of which tax is more. And to be frank, it is only when this windfall arises in a “no tax” state that this is even worth thinking about.

    Would they move away? Well their non dom status after years of living here means that is just the point – many regard themselves as here temporarily, but meaning 30 years rather than 5. I expect most of mine to return home (as they refer to it) at some point, but probably after they cease being economically active. So my observation for the low level non doms (the 60,000 or so) is that changes of this nature will not really affect them.

    One calculation point on the many here for less than 7 years – don’t forget that they lose UK personal allowances and CGT exemption if they claim the remittance basis, even though they are not liable to the charge. That means they are paying small amounts of extra tax – at a guess between £4,000 and £6,000 each, but from a lot more people. Not much mention of how they might be affected by the change, but the likelihood is that paying UK tax on that income rather than claiming the remittance basis will be a similarly mixed picture, with DTR forming a key aspect of the calculation.

  44. Oh, I was adding a comment at the more recent “don’t believe the hype” post, but it disappeared. Here it is again.

    The press coverage of this proposal is of a disappointingly low level.

    A few misconceptions:

    * The so-called “non-dom” regime was not invented by Pitt the Younger and it is not 200 years old. (The word “domicile” does not appear in the 1799 income tax act; there was no income tax in the UK from 1816 to 1842; and with word “domicile” does not appear in the 1842 income tax act either.) That said, the remittance basis for foreign income was a feature of income tax all along since 1799; it originally applied to all taxpayers, whether resident in the UK or not, but was limited to non-domiciled individuals in 1914, so you would be on firmer ground saying it is 100 years old and was invented by Lloyd George.

    * There are many more than 5,000 or indeed 100,000 non-doms in the UK – perhaps several million – but most of them do not bother to claim the remittance basis, or pay the remittance basis charge.

    * Domicile is not an arcane and anachronistic tax loophole. It is a well understood concept of private international law, co-opted for income tax purposes. It will still be important for inheritance (for example, forced heirship in some jurisdictions) and inheritance taxes. Individuals who are resident for many years outside the UK but domiciled here will be liable to pay UK inheritance tax on their worldwide assets, for example.

    * The non-dom regime is not limited to the wealthy. It is available to all non-domiciled taxpayers, irrespective of wealth, but it is not worthwhile for a non-domiciled individual to claim the remittance basis if they don’t have much foreign income or capital gains.

    Now some opinion: if the tax rules are changed as Labour is suggesting, it is unarguable that some people will choose to live somewhere else: some with the option to move will not come to the UK in the first place, and others who are here already will leave. It is not clear that this change will raise any additional direct tax revenues, and the indirect effects (positive or negative) are all but incalculable.

  45. “But that would still leave a yield well north of £1bn.”

    An interesting number that £1bn as that’s the estimated amount of money Roman Abromovich has invested in Chelsea over the last 10 years. How much of that boost to the economy has ended up in the exchequer it wouldn’t be possible to say, nor how much of a multiplier effect it has had (Abromovich pays players, players buy cars and houses, estate agents and car salesmen buy bottles of champagne, off licence owners buy etc).

    But it wouldn’t take too many of the likes of Abromovich to leave or not come here in the first place to wipe out that £1bn boost to the economy.

    OK, it’s all about fairness and not about raising tax so that’s OK.

    But if it’s all about fairness, why have the temporary residence rule?

  46. Another misconception:

    * Domicile is not only inherited from your father. A domicile of origin will be inherited from your mother if your parents are unmarried when you are born, or if you are born after your father dies. If your parents are married when you are born, then the case law indicates that your domicile of origin is inherited from your father. (Until 1974, a woman would adopt her husband’s domicile when they were married, so there would not be a difference; these days, it is much more common for a husband and a wife to have different domiciles.) A child’s domicile can also change while the child is a minor, with a new domicile of dependence following a parent who adopts a new domicile of choice. From the age of 16, a person can adopt a new domicile of choice for themselves, by moving to a new country with the (clearly evidenced) intention to live there permanently or indefinitely. Domicile is “sticky” and is not changed easily, but also depends on subjective intention, and a domicile of origin can be revived if a domicile of choice is abandoned.

    To repeat, domicile is a long established concept, with its roots in Roman law. There is also plenty of case law: that is how the common law is defined and developed. The legal rules are not very complex – no more so than the statutory residence test, with its day counts and connecting factors – but it does contain a factual, subjective element.

    (Now, I wonder if anyone has had to determine the domicile of the children of married same-sex parents with different domiciles …)

  47. Pingback: FCAblog » Non-dom dynamics

  48. Pingback: Tories accused of editing Ed Balls non-dom video to mislead voters | TKG News

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