Labour would scrap 'non-dom' status

Written By Unknown on Rabu, 08 April 2015 | 15.36

City of London skyline

A Labour government would abolish the non-domicile rule that allows some wealthy UK residents to limit the tax paid on earnings outside the country.

Ed Miliband will say non-dom status is a symbol of tax avoidance and "makes Britain an offshore tax haven".

Labour says it is "uncertain" how much money the move would raise, which would affect an estimated 115,000 people.

The Conservatives said the policy was confused and they had raised more money from non-doms than other governments.

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  • UKIP leader Nigel Farage challenged former Labour PM Tony Blair to a debate "any night between now and the election"
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Non-doms are defined as British residents who pay tax on their UK earnings but whose permanent home is deemed to be outside the UK and therefore do not have to pay UK tax on foreign income as long as they do not transfer it to the UK - or they pay a charge of at least £30,000 instead of a full assessment.

Famous examples include Chelsea owner Roman Abramovich, while former Conservative deputy chairman Lord Ashcroft gave up the status in 2010 to keep his place in the House of Lords after a change of law.

Some Labour supporters including businessman Sir Gulam Noon also had non-dom status in the past.

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Analysis by political editor Nick Robinson

Chancellor's red box

Whose side are you on? It is one of the most powerful questions in politics and Ed Miliband believes it is the key to seeing him installed in Downing Street.

That's why Labour is targeting the so-called non-doms today. They're very rich, often foreign and enjoy a lifestyle that makes them resented by anyone who's struggled to make ends meet in recent years.

That is, incidentally, the same reason George Osborne targeted them to pay more when he was in opposition and increased the annual tax charge some pay in his last Budget.

Let's be clear though, these people are not tax dodgers. They pay tax on their UK earnings plus an annual charge of £30,000 or more to have a totally legal tax status that Gordon Brown as well as George Osborne decided to keep as they were advised they risked losing more in tax by scrapping it than keeping it.

Read Nick's full blog

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To qualify, a person is usually either born overseas or has a parent or grand-parent who was born abroad. People are required to prove their status to the tax authorities, either by demonstrating they own property abroad or intend to be buried there.

In his Autumn Statement in December, Chancellor George Osborne announced a new £90,000 charge for people who are non-domiciled in the UK for tax purposes but have lived there for 17 of the past 20 years.

The previous Labour government introduced a £30,000 charge for people resident in the UK for seven of the previous 10 years but who were non-domiciled for tax purposes.

Under Labour's proposals, no new people will be able to claim non-dom status after April 2016 while existing non-doms to whom the rules have applied for a long time would have a "short period" - likely to be five years - to adjust their tax affairs.

'Arcane'

In a speech at the University of Warwick, Mr Miliband will say scrapping non-dom status will be a manifesto pledge, arguing that existing rules are "not very rigorous" and "little proof" is required to show that the beneficiaries are not domiciled in the UK.

He will say: "There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, but aren't required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole."

He will add: "I want to be clear. I don't blame people for taking advantage of non-dom status. I blame governments for fostering a system that can be taken advantage of."

Shadow chancellor Ed Balls told BBC Breakfast that the clampdown could raise at least "hundreds of millions of pounds", but added: "Of course it is very uncertain because we do not know how much income people have in this country, people who aren't paying tax in the same way as everyone else."

He also suggested temporary rules would be put in place for students and foreign workers seconded to the UK for a short period of time, in consultation with business and universities.

'Small print'

The plans won the backing of businessman Duncan Bannatyne, who last week signed a letter backing the Conservatives' economic approach.

On Twitter, Mr Bannatyne said: "This gets my vote I never thought any party would have courage to do this."

But Chancellor George Osborne said the details of Labour's policy suggested they would not abolish non-dom status.

"Either they are going to abolish non-dom status altogether which would cost our country hundreds of millions of pounds in lost tax revenues and lost investment - the reason they did nothing on this during thirteen years in office," he said.

"Or they are just tinkering around the edges and making small adjustments to the rules on how long people can be non-dom. This confusion is another reminder of why they can't be trusted with our economy."

The Conservatives said they had taken the "right approach" in increasing the annual levy on non-doms and would continue to tackle abuse of the existing rules in the next Parliament.

The Liberal Democrats have also pledged to increase non-dom charges.

However, the BBC's assistant political editor Norman Smith said it was notable that neither the Conservatives nor the Lib Dems were opposing the move outright.

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