Saturday, 25 February 2012

"Non-Dom" Tax and Residency Rules

A Tweet that popped up in BFTF's Twitter feed (is BFTF down with the kids or what?) pointed towards a rather disturbing article in the Guardian about "non-doms" and their residency and tax status, suggesting that the way they are treated is so generous that the UK is viewed as a "tax-haven" by the super-rich around the world. The article prompted BFTF to write the question below to the local Conservative Party . . .
Dear Conservative Party,

Having read a number of articles regarding the rules on so called "non-dom" residency and tax status, I am concerned that the current status-quo is unfair, resulting in a high level of complexity and giving the UK as reputation as a tax-haven for the foreign super-rich. I am not a tax expert, but the comments of some who do know something about the issue are shown below :

Duncan Bannatyne, not known for having particularly left wing views, comments that, to reduce their tax on UK earnings, a non dom needs only "say that his or her UK company is managed by a board of directors outside the UK and then make a charge to the company for “management services”. This reduces the pre-tax profit of the company and so reduces its corporation tax bill. The money transferred offshore for “management services” is tax free and can be used to fund the non-dom lifestyle abroad – the yachts, planes and mansions.". His solution is that "UK residents should have a duty to pay UK tax unless they can prove that they are paying equivalent taxes elsewhere in the world. This would level the business playing field and encourage, rather than stifle, the growth of enterprise and small business in this country."

The Chartered Institute of Taxation, comments that "what is really needed is a simpler, more certain basis for the levy. . . in many ways we think the remittance rules are so overcomplex as to really need a complete rethink."

The TUC has written a comprehensive report on the issue and recommends a number of changes that would result in a system that was clear and free from abuse. They estimate that these changes (in which they emphasise they "not making suggestions that make the UK a less attractive place to come to live or work for a period of a few years").According to the TUC, their proposed domicile and tax residency changes should add an additional £4 billion to tax revenues.

My question, at the end of this is to ask what the current government is doing to ensure that non-domicile residents of the UK are paying tax on the same basis as the rest of the population?

Having had no response, sent another email to Nottingham Conservatives to ask for my previous question to be answered.

Received a response from Nottingham Conservatives recently which said :

. . . You are right that in this area and others work needs to be done to ensure that everyone is paying their fair share of tax. It is wrong, although not necessarily illegal, that many high earners can arrange their affairs in such a way that they pay almost no tax at all. The government has pledged to change this. . .

. . .In terms of what has already been done, in the 2011 Budget the Chancellor announced reforms to the taxation of non-domiciled individuals. From April this year the existing £30,000 annual charge for non-domiciled individuals increases to £50,000 for those who have been UK resident for twelve or more years and who wish to retain access to the remittance basis of taxation. Furthermore the Chancellor has pledged to close other major loopholes that the very wealthy exploit and I look forward to hearing more about these proposals in the near future. . .

Perhaps a little embarrrasingly, the HMRC is housed in Nottingham

Image Source : Wikipedia

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