Tax paid in the UK by non-domiciles, often known as “non-doms”, amounted to nearly £7bn in 2013, according to figures obtained by the law firm, Pinsent Mason. Those with non-domiciled status are people who live in the United Kingdom, yet are registered as foreign nationals, and do not pay income tax or capital gains tax on their earnings abroad.
Many people believe that non-doms make little contribution to the UK economy, because it is felt that they exploit loopholes in the system to avoid paying tax. But, pointing out that last year’s total of £6.8bn paid in tax revenues was a record high, Jason Collins, head of tax at Pinsent Masons, says that the amount non-doms have paid in income tax has risen by 19% in the last three years alone.
The way the system works is that non-domiciles can opt not to pay tax to the UK Government on any income or capital gains which are based outside the UK so long as they do not bring that income into the UK. Non-doms do, though, still have to pay tax on income that they generate in the UK.
And, as these figures show, contrary to the popular myth, the contribution made by non-doms to the UK economy is very significant.
Mr Colins sums it up: “They have huge spending power, invest in UK businesses and create thousands of jobs in the UK. They can’t do this if they aren’t here so the Treasury needs to be careful that they don’t kill the golden goose by overtaxing it. There are plenty of other countries competing to welcome these non-doms to their shores.”
One change to the system for non-doms in recent years was the introduction of a non-dom levy in 2008, under which those who had been resident in the UK for seven or more years were obliged to pay an annual levy of £30,000 if they still wished their overseas earnings to be excluded from their UK tax bill. The recent UK budget bill raised the levy to £50,000, which, Pinsent Masons reckon, will bring in £178m to the UK Treasury this year. But that sum represents just 2.6% of the tax paid by non-doms.
The UK Government will continue to hope that they have the balance right with the non-doms: not taxing them so much that they scare them away, but still having them bring in such significant sums into the country’s coffers.
