Non-dom taxpayers account for £9.3bn of UK tax receipts

Non-domiciled taxpayers contributed £9.3 billion to the UK economy in 2014/15 through a combination of income tax, capital gains tax and National Insurance contributions (NICs), according to newly-published figures.

The number of non-doms paying tax in the UK marginally increased in 2014/15, to 121,300, up from 119,800 the previous year. However, the figures are not recent enough to take into account the effect of the UK referendum on EU membership or the recent end of long-term non-dom status on the attractiveness of the UK to wealthy individuals, according to tax expert Steven Porter of Pinsent Masons, the law firm behind Out-Law.com.

The figures also show that UK revenue from the Remittance Basis Charge, an annual ‘levy’ on non-domiciled taxpayers, has stalled at £226 million. The amount raised by the charge is “vastly dwarfed” by that contributed by non-doms in direct taxes, Porter said.

“Non-dom taxpayers make a huge contribution to HM Treasury and the UK economy as a whole – far more than most people realise,” he said. “Many non-doms are highly successful entrepreneurs and businesspeople and generally they are in the UK to run or invest in UK or European businesses, thereby creating thousands of jobs.”

“The Remittance Basis Charge was introduced to extract more tax from non-doms. However, non-doms will be keen to avoid being used as a cash cow, and the government must be careful not to drive them out. The removal of long-term non-dom status earlier this year may have also blunted the attractiveness of the UK to wealthy individuals: many are internationally mobile and can easily relocate,” he said.

‘Domicile’ is a concept distinct from both nationality and place of residence in a given tax year, and effectively means where a taxpayer has his or her permanent home. The rules are complex, and defined through a long line of case law. Non-doms in the UK do not have to pay tax on foreign income and gains that are not ‘remitted’ to the UK in exchange for payment of an annual charge which increases depending on how long that person has been in the UK.

‘Deemed domicile’ provisions, which are expected to take effect from 6 April 2017, end non-dom tax status for those who have been in the UK for longer than 15 of the past 20 years. These people will now be deemed domiciled for income tax, capital gains tax and inheritance tax purposes, and will not be permitted to claim the remittance basis of taxation. Individuals born in the UK will also be prevented from claiming non-dom status while they are living in the UK.

The legislation introducing the rules was included in the finance bill published in March 2017, but was removed from the bill which had to pass through parliament before the June general election. The government has said that the provisions will be included in the next finance bill, which may be published next week, and that they will still take effect from the beginning of the 2017/18 tax year.

The new figures show a particular concentration of “international super-wealthy” in London and the south east of England, according to Porter. Non-doms currently living in those areas contributed 86% of the total 2014/15 tax take, or £7.9bn, according to the figures.