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Non-doms: this extra scam for the ultra-rich must be abolished

Helmsley-only-little-people-pay-taxesOne of the scams highlighted by the HSBC Swiss bank scandal, and then quickly ignored, is the continuing absurd anachronism of the non-dom rules. Stuart Gulliver, the shamed CEO of HSBC, though living in London in order to run the second largest bank in Europe and routing his bonus through a Panamanian company to escape tax, is perfectly legally allowed to avoid tax on all his overseas income because he is technically domiciled in Hong Kong. Even more incongruously, since most non-doms inherit their status from their father, it is possible for people who have been born, educated and lived in Britain for 50 years or more to have non-dom status, even is they hold British passports. All that they have to do to keep all offshore income and capital gains out of the British tax net is to show that they retain strong links to their home country and to show some intention of returning there.

Most of the richest 100 people in Britain are non-doms, according to tax experts. Even though a change in the tax rules in 2012 required non-domiciled individuals to pay £30,000 a year to claim the tax perks, the current rules are still pitted with loopholes. Non-dom private equity executives can still escape tax on their capital gains. Tax specialists estimate that hundreds of billions of pounds are held in offshore trusts and thus pass down the generations free of inheritance tax (though charged at 40% on the UK mainland). And there is concern that the surge of foreign money into London property was encouraged by such loopholes.

This is an area of tax law ripe for radical reform. More than 100,000 people tell the tax authorities they have non-dom status, only about 5,000 non-doms pay the annual charge. Moreover, so long as they set up an offshore trust before they have been living in the UK for 17 years they are still able to sidestep the UK inheritance laws.

Some have suggested modest reforms like stripping non-dom status from those with UK citizenship or who have inherited it, but this is far too limited a reform. Others have proposed shortening the period for those living in the UK in which they can still claim non-dom status to 12 years or so, but again this seems merely an arbitrary restriction on what is fundamentally an unjust and indefensible tax concession. The Treasury has tried to rein in some of the worst abuses like ‘dual contracts’ whereby non-doms can shift taxable income offshore by artificially dividing their duties between the UK and abroad. But as one abuse is ruled out, others are always quickly put in place to secure the same tax advantages. The only real answer, and the right one, is to abolish this outdated and unjust scam altogether.

One Comment

  1. Robert says:

    Yes cannot disagree the worry is we are not seeing politician screaming Jail time, because just maybe if these banks spoke out a lot of our ministers would be heading with them..

    Non Doms were labour way of getting donation to end the Unions . Lord Paul gave to labour £200,000 then the tax payers paid him about a Million in wages so not a bad return on your donation.

    the problem here today is finding a reason to bothering voting Labour.

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