Labor government would scrap UK ‘non-dom’ tax status

A Labor government would replace the ‘non-dom’ taxpayer status enjoyed by many wealthy people in the UK – including the chancellor’s wife – the party announced on Monday.

Rachel Reeves, shadow chancellor, has said Labor will abolish non-domiciled status and introduce a shorter-term scheme for those staying in the UK for up to five years. UK non-doms can currently enjoy foreign income tax-free status for up to 15 years.

Rishi Sunak, the Chancellor, this month raged over the tax status of his wife Akshata Murty, the daughter of an Indian billionaire, after it emerged she was not domiciled in the UK for tax purposes. This saved him millions of pounds in tax on dividends paid by his shares in Infosys, the family business.

She has since announced that she will pay UK tax on her overseas earnings, but has not waived non-dom status which could still save her hundreds of millions of pounds in inheritance tax.

A non-dom is a UK resident who declares that their permanent home is in another country. The statute, first introduced by King George III in 1799 when Britain was at war with France, means that although they must pay UK tax on UK income, they do not have to pay domestic tax on foreign income.

Sajid Javid, the health secretary, admitted he enjoyed non-dom status for several years as an investment banker before entering politics.

Former Labor leaders Ed Miliband and Jeremy Corbyn had vowed to abolish no-dom status altogether.

But Reeves said his proposed program would be more in line with programs in Canada, Germany and France. Work will work out the details in due course, she said.

“It would be a clear, simple and modern system, ending the 200-year-old rules we currently follow which mean domicile is passed down through people’s fathers,” she said.

The initiative is part of a broader review of tax breaks by Labor promised by Reeves at the party conference last fall.

Reeves said it was doubtful the changes would encourage entrepreneurs to leave the country, pointing out that New York has more billionaires than London, even though US residents pay US taxes on all of their worldwide earnings.

“While conservatives are raising taxes on working people, it’s just not fair that those at the top can get outdated non-dom tax benefits,” she said.

“With Labour, people who move to the UK will contribute to this country by paying tax on their overall income.”

Labor estimates that 1,900 non-doms in the UK have had the status for more than five years, while another 44,000 have had it for less than that and would therefore be eligible for the new scheme.

Gordon Brown, then Labor Chancellor, announced almost exactly the same initiative in 2002. He ordered HM Revenue & Customs to launch a exam of the non-dom system — and considering another five-year cap — but the plan was scrapped.

Letter in response to this article:

Linking a chancellor’s wife and wealthy Labor donors / De Miles Dean, Head of International Tax, Andersen, London EC2, UK

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