Tax Bills Rising For UK Non-Doms

by Jason Gorringe, Tax-News.com, London

05 September 2007

There has been a sharp rise in the amount of tax paid by people resident in the UK but claiming non-domicile tax status, according to the UK's tax authority.

HMRC's latest set of accounts have revealed that there was an 80% increase in the amount of tax paid by non-domiciled taxpayers in the UK in the most recent tax year, perhaps reflecting HM Revenue and Customs's increasing interest in this class of taxpayer.

It was reported recently that there has been a dramatic rise in the number of individual taxpayers claiming 'resident but not domiciled' status in the last two years. In the 2004/5 tax year 110,000 people claimed non-dom status, but according to a recent report by the Observer newspaper, this is expected to almost double to about 200,000 by the end of the 2006/7 tax year.

Such reports, combined with claims that wealthy investors and celebrities are paying relatively little tax in the UK, have fuelled calls from some for the government to scrap the non-domicile tax rules, which allow foreigners resident in the UK to avoid Brtish taxes on their overseas income as long as it is not remitted back to the UK.

These rules have also been queried by foreign governments, as in the case of Motorcycle racing champion Valentino Rossi, who was accused of using these laws to evade Italian taxes. "A more or less fictitious residence in London allows you not to pay taxes in your own country," according to Italy's deputy economy minister, Vincenzo Visco, who has hinted that the Italian authorities may urge the European Commission to challenge the British law.

Meanwhile, pressure is increasing on the Treasury to report the findings of a long-running review into the non-domicile tax rules.

"Given the apparently rising number of the non-domiciled, and a perception that monitoring of the status of non-domiciles is weak, it is essential that the Treasury and HM Revenue and Customs are able to demonstrate that they have a rigorous approach towards claims of non-domicile status," the Treasury Select Committee said in a report published in August.

However, the government is not exactly rushing to publish the findings of this review, which was launched in April 2003, mindful that it could send the wrong signals to the City, where many non-doms conduct their business and investment activities.

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