RECORD tax raid from the HMRC on ultra-wealthy non-dom taxpayers has increased fears of wealth creators leaving the country due to rising costs, reported The Telegraph.
According to official data, non-doms and deemed domiciled individuals paid a staggering £12.4 billion in taxes during the financial year ending in 2022.
Despite a decrease in the number of people with non-dom status due to the pandemic, this marked a significant 10 per cent increase compared to the previous year and represents the highest amount recorded since data collection began in 2008.
Despite a decline in the number of non-doms compared to pre-pandemic years, the tax revenue increased. This is attributed to changes in rules implemented in 2017, which have resulted in a growing number of wealthy internationals losing their tax benefits, The Telegraph report added.
The non-dom individuals are those who are UK residents but have a permanent home outside the country. They pay British taxes only on income earned in the country for the first seven years, but not on foreign income. After this point, they pay an annual fee to benefit from this remittance, starting at £30,000 and rises to £60,000.
The change in rule introduced in 2017, impacts non-domiciled individuals residing in the UK. Under the new rule, if a non-dom has been a UK resident for 15 out of the 20 years preceding their tax return year, their tax status is transformed into deemed domicile.
As a result, they are obligated to pay taxes in the UK at the applicable rates on their global income. This change exposes them to significant potential increases in their tax liabilities.
Opposition Labour already announced plans to scrap the non-dom system following the media storm surrounding prime minister Rishi Sunak’s wife, Akshata Murty.
Last year, it emerged that Murty had non-dom status. She later said she would start paying UK tax on her overseas earnings as she did not want to be a ‘distraction’ for her husband.
According to Lucy Woodward, a partner in the private wealth team at Saffery Champness, the shift to becoming deemed domiciled has already pushed some wealthy internationals to leave the country.
She revealed that one of her clients has express intention to leave the UK if the non-dom system is scrapped.
“It is also the public opinion against non-doms and that sense feeling unwelcome,” she is reported to have said.
Chris Etherington, private client partner at RSM accountants, views the 2017 measures as ‘an attack on non-doms’.
“The biggest concern among a lot of our clients is around what Labour’s proposals are in abolishing the non-dom status altogether. I think individuals who are globally mobile will take action if the domicile status was taken away,” Etherington was quoted as saying by The Telegraph.
In the tax year following 2022, individuals categorised as deemed domiciled will also experience the impact of the chancellor’s discreet tax increase on both incomes and inheritances.
Higher-income earners are expected to bear a disproportionate burden due to the freezing of tax thresholds, as a larger portion of their income falls within the highest tax bracket, the report added.
