The Labour Party and Non Dom Status - Should you be worried?
This is not come as a complete surprise. Governments of both hues have been trying to extract more and more tax from non-doms, and some sort of attack was expected from the labour party, but abolition is probably a step too far in reality and the most likely scenario is a tightening of the laws in this area.
The non-dom regime is indeed an anomaly compared to other countries which tax their residents on their worldwide income and capital gains. However, the regime has undoubtedly contributed to the UK’s large financial sector and it has made our country attractive as a destination for international investors and financiers.
The status was introduced over 200 years ago in response to issues relating to shipping, and while the matter has always been contentious over 40 governments in that time have not seen fit to abolish it, mainly because of fears of causing an exodus of wealth from the UK and the resulting tax and talent loss. The current climate though with the demonising of legal tax avoidance driven by the media and left wing parties the policy is likely to be popular with the so called man in the street. The point though is how far dare any government actually go in abolishing the status? For example
115,000 Non Doms pay the more tax than 10 million low paid workers
The average tax paid by a non dom was £72,038 last year
While this change could be the last straw for certain people who are being hit with higher taxes from different directions, including the proposal for a mansion tax on their properties. There are other jurisdictions, such as Hong Kong, which offers both a lower tax rate and also only taxes locally sourced income, which will welcome them. However, we do not believe that the changes will be as dramatic as Labour would have us all believe the most likely outcome is a raise in the remittance basis charge to say £50,000 after 7 years raising to say £150,000 after 17 years. There may also be a limit on claiming the remittance basis for a certain number of years. What is certain is that we will all need to keep a careful watch on things if Labour do get into power and it will be highly likely that a new planning approach will be needed.
Posted on Apr 09, 2015.