Warning over sharp fall in hard-pressed 'non-doms' numbers

08/08/2018 John Evans, international editor of thewealthnet,

The number of non-domiciled residents in the UK has fallen sharply, a reduction associated with the increasing number of taxes and restrictions they face.

Statistics released by the UK's HM Revenue & Customs (HMRC) show that there was a 23 percent fall in the number of individuals claiming non-dom tax status in the last financial year, down from 118,000 in 2015/16 to 91,100 in 2016/17.

While part of that reduction may be from individuals dropping their non-dom tax status, HMRC indicates that the fall in numbers will also be from non-doms leaving the UK, as has been claimed.

The fall should be “a warning sign” to the UK government about badly-needed inward investment with Brexit just around the corner, said Anne Healy-McAdam, a tax specialist at Pinsent Masons.

 “A lot of non-doms have seen the Government’s increasingly aggressive stance taken towards them, and with constant changes to the legislation there is a lack of certainty so they have decided enough is enough,” she added.

In recent years, the UK government has introduced measures making it harder for individuals to claim to be non-UK domiciled, especially when they have been resident in the UK for a number of years.

Since 6 April 2017, an individual who has been UK resident for 15 out of the last 20 years may be deemed to be domiciled in the UK for income tax, capital gains tax and inheritance tax purposes.

Those who are deemed to be UK domiciled will not be able to access the favourable remittance basis of taxation, whereby income and gains which are not brought into the UK are not subject to UK tax. Such a domiciled individual will be subject to UK inheritance tax on their worldwide assets.

“With Brexit fast approaching, the UK will need to encourage as much inward investment as possible. Some non-doms seem to have evaluated the political landscape in the UK and decided that they would be better off being based elsewhere,” Ms Healy-McAdam said.

“UK non-domiciled-tax payers are among the most geographically mobile citizens in the world, and the move by the UK government to tax their global income has made many of them think they can get a better deal elsewhere,” she added.

As non-domiciled tax payers invest large sums of money into the UK and create thousands of jobs through their businesses, there is “a real risk that the UK will lose much of this if it continues to encourage non-doms to go elsewhere,” she contended.

Non-doms currently pay around £9.4 billion in tax and NICs in the UK.

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