Encouraging non-doms to pay their tax in the country of their residence without making a move elsewhere has long been a quandary for various governments.
A recently published tax collection statistic has shown that the total amount collected has plateaued recently at just over £9 billion for each of the three years ended 5 April 2017. For the last year where statistics are available, the total tax has reduced to £7.5 billion for the year ended 5 April 2018.
Alternative countries such as Italy, Portugal, Cyprus and Malta are looking to encourage more of the wealthy non-doms to come and live in their country to increase their tax take.
So what has the UK done?
Prior to 6 April 2008, a non-dom could elect, free of any tax charge in the UK, to be taxed on the remittance basis, i.e. their overseas income would not be taxed if it were not remitted to the UK. Gradually, tax on non-doms was increased dependent upon the number of years they were resident in the UK starting with a flat charge of £30k if they were resident for seven out of the previous nine years. The charge increased from the 6 April 2012 when £50k was introduced if a non-dom was resident for twelve out of the last fourteen years. Subsequently, a further charge was imposed from the 6 April 2015 of £90k if a non-dom was resident for fifteen out of the previous twenty years. The last and maybe most significant change was introduced from 6 April 2017 when the £50k charge was increased to £60k and non-doms could no longer claim non domicile status indefinitely if they were resident for fifteen out of twenty years. In these circumstances, a non-dom’s worldwide income and gains will be taxable in the UK and there is no option to pay the remittance basis charge.
For the Government, when considering how the system can be fairer, it is always a balance between the attractions of living in the UK compared to the amount of tax they pay on their income from abroad. Many non-doms are employed or self-employed in the UK, generating profits and creating additional jobs here. This is supported by the fact that of the total of £7.5 billion tax, £1.9 billion is represented by National Insurance. Non-doms are presumably therefore working with others thereby making an overall economic contribution to the UK which will augment their own direct tax contribution.
A difficult taxation balancing act for the Government, when trying to make their own books balance.
Disclaimer: The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.