Monday, February 24, 2020

Election 2015 – Labour’s Non-Dom Plans Explained

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Non-doms would seem to have little chance of surviving financially unscathed if Labour gains power in Election 2015.

The logical result is one of the two major parties will win outright or form a coalition with a minor partner.

As Labour has published new rules affecting wealthy non-doms in their manifestos, tax changes would seem on the way sooner rather than later if they grab a high number of seats in Westminster.

Around 116,000 wealthy non-doms lives and work in the UK, contributing an estimated £8 billion a year to the economy through taxes, providing jobs and buying homes.

Few have significant overseas income, while many more are thought not to bother claiming non-dom status as their tax position is likely to remain the same.

One of the most high profile is Bank of England governor Mark Carney, who is Canadian.

What can non-doms expect after Election 2015?

Labour wants to abolish the non-dom tax status, which allows non-doms to earn money overseas without paying tax in Britain providing they pay a £30,000 a year fee for their residence status and higher taxes on buying luxury homes, such as more stamp duty and a charge for owning a home with a company.

The £30,000 tax charge comes into effect after a non-dom has spent seven years in Britain.

Carney earns a salary of £874,000, but does not pay the same tax as someone resident in the UK.

For Labour, wealthy non-doms are soft targets in a campaign to recruit disaffected voters with low-paying jobs or surviving on slashed benefits.

Scrapping the non-dom rules would mean non-doms become UK tax resident and pay tax on their worldwide earnings in Britain or they leave the country for somewhere with a more friendly tax regime, like the Channel Islands or Switzerland.

Talent drain

The fear is Britain would see a talent drain as top executives and business people leave the country to escape what they would consider penal taxation.

Attacking non-doms is also laying bait for the Conservatives. If the Conservatives oppose the Labour non-dom plans, then they look to be defending the rich against the poor.

Who qualifies for non-dom status is not a matter of choice, but depends on the results of the Statutory Residence Test.

The test looks at a number of factors, like family and financial ties to the UK and time spent in the country.

The test was introduced by the Conservatives in April 2013 after a number of court cases struggled to define tax residence for wealthy expats.

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