8th July 2015
The Government will scrap permanent non-dom status from April 2017, the Chancellor announced in today’s Budget.
Individuals who have lived in the UK for 15 of the past 20 years will no longer be able to claim permanent non-domicile status, in a move that George Osborne said will bring in an extra £1.5bn in taxes.
He said that non-domicile tax status has been in place since 1914, that plays an important role in allowing those from abroad to contribute to our economy, claiming that simply abolishing it altogether, would, as Ed Balls acknowledged, “probably cost the country money”.
Osborne said that many of those with non-dom status make a “considerable contribution” to our public life and to tax revenues.
But he said: “It is not fair that people who are born in the UK to parents who are domiciled here, can later in life claim to be non-doms and live here.
“It is not fair that non-doms with residential property here in the UK can put it in an offshore company and avoid inheritance tax.”
Osborne added: “Most fundamentally, it is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.
“Non-dom status was meant to be temporary, but it became permanent for some people. Not any longer […]
“Anyone resident in the UK for more than 15 of the past 20 years will now pay full British taxes on all worldwide income and gains.”
Nigel Green, chief executive of deVere Group, the adviser, says: “It is delusional to believe that there will not be far-reaching, adverse consequences to taxing the wealthiest in our society more harshly.
“It is a naïve policy measure in the extreme. Why? Because it is almost certain that the move will trigger an exodus of many of Britain’s most successful wealth and job creators, who also support the Revenue through their significant UK income tax receipts and personal spending. Can the UK afford to lose these people when other countries are vying hard to attract them?
“In addition, it is going to make Britain a less attractive place to work for top international talent, meaning lower tax revenues. This can all only bode ill for the UK’s sustainable, long-term economic growth.
“Even if the tax raid brings in the estimated £1.5bn reported by Osborne, the underlying economic cost will be much higher than the narrow fiscal boost.”
Richard Morley, partner at BDO, added: “The Chancellor, as expected has included changes, originally championed by Labour in a last minute election grab, to abolish the permanent non-dom status.
“The policy, which is expected to raise £1.5bn, means many more Brits will now be liable to pay full UK taxes from April 2017.
“Currently a UK Resident Non-Domiciled (RND) individual can live in the UK for most, if not, all of their working life and claim to be a non-dom, and therefore reap the tax benefits.
“The announcement today specifically aims to address this and crack-down on long-term non doms which are resident in the UK, without an intention to remain indefinitely, as well as second generation non-doms who automatically claim the domicile of their ‘parent’ giving many non-dom status.”