In context: non-dom tax status
If you need to ask about it, you probably haven’t.
Government ministers’ tax affairs have been in the spotlight after it emerged the chancellor’s wife, Akshata Murty, had used non-dom status to reduce the sum she was required to pay to the treasury public in the UK.
Rishi Sunak’s problems quickly became Sajid Javid’s when it emerged he held status before entering Parliament.
It’s perfectly legal, but there have been calls from opposition parties for clarity on the financial interests of those who make the rules for how we live and work.
Lord Geidt, the Prime Minister’s independent adviser on ministerial interests, is to carry out a review of all statements made by Sunak since he entered government in 2018. This is after the Chancellor wrote to quiz Boris Johnson on such decision in order to put an end to speculation. about his family’s arrangements.
But there remain questions about what is known and should be known about the personal financial situation of government figures.
How many government ministers have non-dom status?
Ministers are not permitted to hold non-dom tax status. However, this rule does not cover their immediate family members. In an interview with Sky News, Environment Minister George Eustice said he had never had the status and would never apply for it.
The government said that under the Ministerial Code, “all Ministers provide information on their tax affairs to the Cabinet Office and the Independent Advisor on Ministerial Interests”.
But it is a useful tool for those who meet the criteria. Holders of non-dom status still have to pay UK tax on UK income, but not on money earned elsewhere. According to a report by the London School of Economics (LSE) and the University of Warwick, more than one in five top-earning bankers have benefited.
Although status holders must be UK residents whose permanent home is in another country, they are not required to spend the majority of their time outside the UK. There is however an obligation to pay an annual charge of £30,000 per year, up to £60,000 for those who have been in the UK for at least 12 of the previous 14 tax years, but can save money important. if their chosen domicile is in a low-tax country.
According to the LSE and Warwick study, two in five of the oil sector’s highest earners – those earning £125,000 or more – are non-doms, along with one in four in the car industry. Meanwhile, one in six of our highest earners from sport and film have used the status and have an average income of £2m each. In fact, four in ten of those who earned £5m or more in 2018 used the status at some point, the researchers found. While most non-doms live in London and the Home Counties, 1% of those living in the Aberdeen South constituency have used status, the research found.
Proponents of the scheme argue that it still allows money to enter the UK economy through staff and service providers used by non-doms.
While Sunak accused the critics of ‘coming’ to his wife, Murty said she would pay UK tax on outside income, to avoid being a ‘distraction’.
Why is it important?
Murty’s tax arrangements are thought to have saved him £2.1million a year. She owns shares worth £700million in Indian IT operator Infosys, founded by her billionaire father. She received £11.6million in dividend income last year.
The Chancellor said he informed the Cabinet Office of Murty’s non-dom status when he entered government in 2018 and he is confident Lord Geidt will find his financial statements “appropriate”.
Labour’s Louise Haigh said that while the legality is clear, “the question many people will ask is whether it was ethical and whether it was right for the Chancellor of the Exchequer, while racking up 15 separate tax increases for the British public, has been benefiting from a tax scheme that allowed their household to pay significantly less, to the tune of potentially tens of millions of pounds”.
Who established these rules?
They have been in place for about 200 years, but the most recent revisions were made under the Tories in 2017. These reforms imposed a 15-year limit on non-dom status.
Javid spent six years as a non-dom while working in banking and taking home a salary of around £3million a year. He gave it up in 2009 before becoming a deputy. “Given the heightened public interest in these issues, I want to be open about my past tax status,” he said.