HMRC has launched a record-breaking raid on ultra-wealthy non-doms amid fears that rising costs could drive wealthy individuals out of the UK.
According to official statistics, non-doms and individuals deemed to be domiciled paid £12.4bn of tax for the fiscal year ending in 2022. This is despite the fact the numbers of people who have non-dom status have dropped in recent years.
The total was the highest ever since statistics began in 2008.
Tax revenue was up, despite the fact that the number of nondoms dropped compared to pre-pandemic levels. This is because new rules introduced in 2017 have meant more and more internationals who are wealthy lose their tax benefits.
Non-doms, those who reside in the UK but maintain a permanent residence outside of the country, pay British taxes on their income only for the first seven tax years. They pay an annual fee after this to receive this remittance. The fee starts at £30,000, and goes up to £60,000.
In 2017, the government changed the rules to change a nondom’s tax status to “deemed domicile” if they have lived in the UK 15 out of 20 years prior to the tax year. The government changed the rules in 2017 so that if a non-dom has lived in the UK for 15 of the 20 years leading up to their tax return year, their tax status changes to deemed domicile.
Lucy Woodward is a partner at Saffery Champness in the team for private wealth. She said that the change to deemed domicile has already caused some wealthy foreigners to leave the UK.
Chris Etherington of RSM accountants’ private client partnership said that the 2017 measures are “an attack against non-doms”. He warned, however, that even bigger measures are coming, the stealth tax raid by the Chancellor on inheritance and income will be imposed in the tax year following 2022. The tax threshold freezes will have a disproportionate impact on higher earners because they fall into the highest tax bracket.
The party currently in the lead for the next general elections, has promised to abolish the non-dom system .
Mr Etherington stated: “The greatest concern for many of our clients revolves around Labour’s plans to abolish the non-dom status. I believe that individuals who are global mobile would take action if domicile status were taken away.
He added that the number of new arrivals has already started to decline.
Ms Woodward stated that she has a client with a high net-worth who said he would leave the UK, if the nondom system was scrapped.
She said: “It’s also the public sentiment against non-doms, and that feeling of being unwelcome.”
Labour announced their plans following the media storm caused by the revelation that Akshata Muruty, Prime Minister’s spouse, had nomdom status. She has since revoked this status.