Ed Miliband: Labour will scrap non-dom tax status

Labour leader will say 18th-century rule is morally wrong as it suggests ‘anything goes for those at the top’ – but he stops short of blaming non-doms directly

Ed Miliband will promise to end a colonial-era symbol of inequity in the tax system by announcing that, if he wins the election, he will abolish the non-domicile rule that allows many of Britain’s richest permanent residents to avoid paying tax in the UK on their worldwide income.

Labour will say the rule, introduced by William Pitt the Younger in the late 18th century, has been wide open to abuse and offends the moral basis of taxation. Everyone who has made the UK their permanent home should pay full UK tax on all their income and gains, he will argue.

In a speech in Warwick on Wednesday, Miliband is expected to say the non-dom rule, believed to be used by more than 110,000 wealthy people in a system unique to the UK, is born of a discredited belief that “anything goes for those at the top and that what is good for the rich is always good for Britain”.

Non-doms pay UK income tax and capital gains tax on their UK sources of income and gains, and whatever income generated overseas they choose to remit to the UK. By contrast, UK domiciles have to pay tax on all of their income and gains, wherever in the world they are made – Britain or overseas.

George Osborne has tinkered with the non-dom system by increasing the annual fees on those who are granted non-dom status, but Labour claims the rules are shot through with anomalies. Labour says those who have lived abroad and return to the UK can claim non-dom status simply on the basis of nothing more than a burial plot, a foreign bank account, or a father born abroad – and even an overseas newspaper subscription.

The anomaly was recently highlighted by the case of HSBC’s chief executive Stuart Gulliver – first reported in the Guardian – who is able to claim non-dom status because he previously worked in Hong Kong, even though he was born and raised in Britain, has worked in the UK for past 12 years and sends his children to school in the country.

Labour said the change would raise hundreds of millions of pounds, but was careful not to give a precise figure, partly because the numbers taking advantage of the rule, and the value to them, is a matter of dispute.

Critics will claim that abolition of non-dom status, taken with Labour’s plans for a mansion tax and a 50p top rate of tax, will spark an exodus of the super rich from London to other European capitals, Switzerland or the Far East. It is argued non-doms still pay huge sums to the Treasury, even as much as £132,000 per person per year on average, and abolition will simply lead to a long-term fall in revenue.

But Miliband will insist that the long-standing non-dom rule has become a symbol of the scandal of tax avoidance, and he would abolish it from April 2016.

He will say: “There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain like you and me, but aren’t required to pay taxes like you and me because they take advantage of what has become an increasingly arcane 200-year-old loophole. There are now 116,000 non-doms, costing hundreds of millions of pounds to our country. It can no longer be justified, and it makes Britain an offshore tax haven for a few.”

Anger at the non-dom rule has spread to other parties including the Liberal Democrat business secretary Vince Cable, a long-term advocate of its abolition.

There has also been some opposition in Conservative circles, with hostility from Richard Bacon, the senior Conservative on the Commons spending watchdog, the public accounts committee.

Bacon, at a hearing of the committee last month, complained abut the non-dom system to the head of Her Majesty’s Revenue and and Customs, Edward Troup, saying under both Tory and Labour governments “you can easily spend 80% to 100% of your time in the UK because you are resident here, and be a non-dom for tax purposes.

“No wonder people are pissed off. It’s extraordinary, frankly, in all honesty. You are surprised that people think there is one set of rules for rich people and another set of rules for other people, when you have just told us exactly that is what there is.”

Labour will stress that foreigners in the UK for a genuine temporary short period will be able to retain non-dom status. The party intends to consult on the length of that period if it wins the election.

Richard Murphy, the left-of-centre tax expert, has suggested that the grace period could amount to five years, arguing that, without such a time frame, foreigners could be subject to being taxed in two jurisdictions, including their permanent place of residence overseas.

In effect, Miliband is criticising the previous Labour government that allowed the number of non-doms to swell until it introduced a rule in 2008 requiring non-doms to pay an annual fee. The Labour leader, aware that some of his donors are non-doms, will also add: “I don’t blame people for taking advantage of non-dom status. I blame governments for fostering a system that can be taken advantage of.”

Someone who is a non-dom and lives in the UK for less than seven years can currently use the special non-dom rules free of any charge. They then have to pay charges ranging from £30,000 a year for people who have been UK resident for seven out of the past nine years, to £90,000 a year for those who have been UK resident for 17 of the past 20 years.

Miliband will dismiss the criticism that the rule change will lead to entrepreneurs leaving the country, arguing the same objections have been raised about bank regulation, regulating the energy companies or the 1997 windfall tax on utilities.

“The correct belief in enterprise and wealth creation,” Miliband is expected to argue, “has become distorted into an idea that wealth only flows from a few at the top – and they are so important that they should be allowed to operate under different rules. It is an idea that says anything goes for those at the top, that what is good for the very rich is always good for Britain.”

The Labour leader will argue there is a moral reason for taxpayers to pay tax in the same way. “We all use the same roads, we are all protected by our police and armed forces, even those who go private sometimes rely on the NHS. It is the common good. We use these same services, therefore we all owe obligations to help fund them according to our ability to do so.”

http://www.theguardian.com/politics/2015/apr/07/ed-miliband-non-dom-tax-status-labour


Duncan Ballantyne tweeted:



Duncan Bannatyne ‏@DuncanBannatyne 36 mins36 minutes ago

Ed Milliband says he will abolish non-dom status in UK. This gets my vote I never thought any party would have courage to do this.




I never thought a prospective PM would have the guts to say he is going to abolish non-dom status. That will stop a huge amount of tax evasion. Bloody brilliant.

Perfectly sensible idea which will get the approval of all morally sound people who care for the UK , and not just their bank balance.

Duncan Ballantyne has been saying it gives some businesses an unfair advantage for ages, this from 2010:

Duncan Bannatyne: Why Non-Doms have an ‘unfair’ advantage in business
Would you give your customers your products if they paid one of your competitors for them? Then why do we allow people to live in the UK, receive public sector services from the government, but pay for them in the form of taxes to another country?



Although non-doms are not required to pay tax on earnings made outside the UK, that’s not the end of it. They can also reduce the tax on their UK earnings, and here’s how it can happen.

A non-dom simply needs to say that his or her UK company is managed by a board of directors outside the UK and then make a charge to the company for “management services”. This reduces the pre-tax profit of the company and so reduces its corporation tax bill.

The money transferred offshore for “management services” is tax free and can be used to fund the non-dom lifestyle abroad – the yachts, planes and mansions.

The non-dom situation is very relevant to business owners like me in the UK because we find ourselves at a distinct disadvantage when competing with businesses owned by non-doms. Normal UK business owners pay taxes on all earnings before paying for a new car or a family holiday, unlike nondoms, so there is less money available to pump back into the future of their businesses.

This is not the fault of the non-doms; rather, it is the laws that allow them to play the system that need addressing, but If the country has more and more non-dom run businesses in 20 years time corporation tax has got to go up to fund the non-doms. The law has to be changed.

Non-doms have to provide for their families and they often give generously to charities abroad. I understand their motivations completely. But the situation is not fair and the laws need to be changed; if they aren’t, the vast majority of UK businesses will feel unfairly penalised and more of our country’s assets will be controlled by non-doms.

Two of my ‘Dragon’ colleagues are non-doms. Does this status give Doug Richard and James Cann and unfair advantage in the business sectors? I think that it would be safe to assume that it does for the reason that i have already outlined, butthis issue is far more than two people.

As I pay UK tax on all of the earnings that fund my lifestyle, and corporation tax on all of the profits made by my businesses which employ 3421 people, I am clearly at an unfair disadvantage if someone enters my business sector with a non-dom management structure as they will be operating from a far lower cost base.

The current Lord Ashcroft story highlights the inadequacy of the domicile rule when applied to taxation, and points to the urgent need for reform.

In my view, all UK residents should have a duty to pay UK tax unless they can prove that they are paying equivalent taxes elsewhere in the world. This would level the business playing field and encourage, rather than stifle, the growth of enterprise and small business in this country.

A change would also create badly-needed revenue to the exchequer and help to ensure that our economy emerges as strongly as possible from the downturn, by rewarding innovation and productivity, rather than giving the ability to exploit tax loopholes.

http://www.bmmagazine.co.uk/news/duncan-bannatyne-on-why-non-doms-have-an-unfair-advantage-in-business/

He certainly has a point.

Rumours George Osborne is going to try and play catch up and announce the same thing. We will have to see, will his masters and donators let him?

A fine example of spamming an article onto an existing thread and then spamming in back up when nobody else has posted since that person.
Seriously the forum is getting beyond a joke.

Oh dear, lost his chance, his masters have screamed about having to pay out money and like a good little boy they have said jump and he says, how high:

10:49Wednesday 08 April 2015

The UK would lose "hundreds of millions of pounds" in lost revenue if Labour was allowed to end the non-dom status used by wealthy individuals to avoid UK tax, Chancellor George Osborne said.

http://www.thestar.co.uk/news/national/osborne-slams-labour-s-non-dom-plan-1-7197952

So a non-Dom could simply go and live in another country and pay no tax to the UK whatsoever. How will that raise more tax?

Lets play a maths game

How many points has Sassy made and how many articles has she spammed on here?

Brasidas wrote:Lets play a maths game

How many points has Sassy made and how many articles has she spammed on here?

That should really be in the other thread.

Why should I pay tax in the UK on income I've earned in another country?

whats earned here should be taxed here
simple really....

Fuzzy Zack wrote:Why should I pay tax in the UK on income I've earned in another country?

you dont(generally) since you will have paid tax on it "over there"

this about money made here being cleverly "siphoned off" abroad, to reduce the tax burden on money made here...

cheating the tax payer in otherwords...the biggest "social fraudsters"

Absolutely right Victor. Glad to see Cons made the mistake of backing non doms, making sure the rich get richer.

Non-doms: If George Osborne wanted to win he would not be defending a tax perk for the rich.

You know all those people complaining that the election campaign would be about sound bites and superficialities rather than policies? Well, they have not been vindicated so far. First, a substantial speech making the case against a referendum on our membership of the European Union from a Labour former Prime Minister (not a “former Labour Prime Minister”: BBC, please note).

Now a promise to abolish an anomalous, unfair and unjustifiable tax perk for the rich. Sensible Labour policies are rarer than foil holographic Charizard cards, so we should welcome this one enthusiastically even if it is unlikely to raise much money or may even lose the Exchequer some.

Non-domiciled status for tax purposes is a bizarre anachronism and Ed Miliband is quite right to seek to get rid of it. I don’t know the finer points of the relevant law, but that means that I have a head start over most of the politicians and commentators who are talking about it. You need to know only two things: one is that the rules for being a resident of the UK are not the same as the rules for having the UK as your domicile for tax purposes – and that the difference is advantageous to some people. The other is that in some situations non-dom status is heritable. We are talking, therefore, about a hereditary tax-favoured status. How on earth can anyone justify that?

http://www.independent.co.uk/voices/comment/nondoms-if-george-osborne-wanted-to-win-he-would-not-be-defending-a-tax-perk-for-the-rich-10163183.html

I find it funny how Ed balls has said before this will not work.

Labour need to make up their mind on this.


http://www.bbc.co.uk/news/election-2015-32215051