Too high a price for non-doms?

Robert Macro, consultant at Dawsons LLP, discusses the impact of the new charges for HNW resident non domiciled taxpayers.

When it was announced in the papers that George Osborne was considering a new levy on Britain’s resident non domiciled tax payers, I could almost hear the groan from the wealth management community in London. After the changes introduced by the Finance Act 2008, which brought in a £30,000 annual charge on those resident non domiciled individuals who wished to live in the UK but not be taxed on overseas earnings and capital gains, many predicted an exodus which would damage the economy at a time when the Government could ill afford to do so.

The charge’s impact

It appears from the Chancellor’s recent press release that the £30,000 charge, which currently only applies to those individuals who have lived in the UK for seven out of the last nine tax years, is not producing the tax revenues expected. There are around 120,000 resident non domiciled individuals in the UK. Politically, the position of an individual living in the UK but not paying tax on overseas income and capital gains has never been more in view.

Consequently, a further change is proposed to the taxation of these individuals. The new proposal is to extend the annual charge to take advantage of the remittance basis of taxation to all non domiciled individuals who are resident in the UK. However, while the headlines may make interesting reading, the reality is that further changes cause uncertainty and that uncertainty will threaten yet another exodus which last time saw 16,000 non domiciled individuals leave the UK in the first year following Gordon Brown’s introduction of the charge.

Those involved in the upper echelons of the wealth management industry will know that the £30,000 charge and the remittance basis of tax is not why these ultra high net worth individuals are resident in the UK. It will not present a problem for the likes of Roman Abramovich and Lakshmi Mittal to pay what is effectively a small charge to shield considerable income and gains overseas.