This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.theguardian.com/uk-news/2015/jul/08/non-dom-tax-status-abolished-individuals-born-uk-budget-george-osborne
The article has changed 6 times. There is an RSS feed of changes available.
| Version 4 | Version 5 |
|---|---|
| Permanent non-dom tax status to be abolished, chancellor announces | Permanent non-dom tax status to be abolished, chancellor announces |
| (35 minutes later) | |
| George Osborne has pledged to end permanent entitlement to the controversial non-domicile loophole that has let thousands of wealthy families live in Britain without paying tax on their overseas income. | George Osborne has pledged to end permanent entitlement to the controversial non-domicile loophole that has let thousands of wealthy families live in Britain without paying tax on their overseas income. |
| Non-dom status will be taken away from those who have lived in the the UK for more than 15 of the last 20 years, catching those families who in some cases have passed the tax perk down through three generations. | Non-dom status will be taken away from those who have lived in the the UK for more than 15 of the last 20 years, catching those families who in some cases have passed the tax perk down through three generations. |
| It will also be removed from hundreds of individuals, like the HSBC boss Stuart Gulliver, who were born in Britain to British parents and became non-doms after moving abroad. The measures together could affect 15,000 individuals, according to the Treasury. | |
| “British people should pay British taxes in Britain - and now they will,” said Osborne, as he announced the clampdown as part of the summer budget. The new rules take effect in April 2017 and could raise £1.5bn over the course of this parliament. | “British people should pay British taxes in Britain - and now they will,” said Osborne, as he announced the clampdown as part of the summer budget. The new rules take effect in April 2017 and could raise £1.5bn over the course of this parliament. |
| The chancellor said: “It is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.” | The chancellor said: “It is not fair that people live in this country for very long periods of their lives, benefit from our public services, and yet operate under different tax rules from everyone else.” |
| Experts warned the measures could lead to an exodus of the foreign billionaires whose names now dominate the lists of Britain’s wealthiest residents. The Russian oligarch Roman Abramovich, the steel magnate Lakshmi Mittal, the rag trade tycoon Richard Caring, the newspaper proprietor Viscount Rothermere, television star and businessman James Caan, the packaging heir Sigrid Rausing and the architect Norman Foster are among the many famous names thought to have benefited from non-domiciled status. | |
| “We will see fewer oligarchs,” said Bill Dodwell, tax policy head at accountants Deloitte. “Foreign billionaires who don’t work and have massive global businesses - these people will probabaly cease to be UK citizens once they pass 15 years. It’s unlikely they are going to volunteer to pay UK tax on their global income. They may retain UK homes and send their children to school here but they themselves will have to spend a reduced numbers of days in the UK.” | “We will see fewer oligarchs,” said Bill Dodwell, tax policy head at accountants Deloitte. “Foreign billionaires who don’t work and have massive global businesses - these people will probabaly cease to be UK citizens once they pass 15 years. It’s unlikely they are going to volunteer to pay UK tax on their global income. They may retain UK homes and send their children to school here but they themselves will have to spend a reduced numbers of days in the UK.” |
| The unfairness of the non-dom regime was exposed after the Guardian’s investigation into HSBC’s Swiss subsidiary showed how widely the tax perk, unique to Britain, was being exploited by politicians, footballers, bankers and businessmen. | The unfairness of the non-dom regime was exposed after the Guardian’s investigation into HSBC’s Swiss subsidiary showed how widely the tax perk, unique to Britain, was being exploited by politicians, footballers, bankers and businessmen. |
| Public councern mounted when it was revealed that Gulliver, the HSBC chief executive, was able to be non-domiciled, despite being born and educated in the UK. Although Gulliver lives in the UK and runs a British bank, he was able to argue he should not pay tax on his income from outside the UK because he had worked abroad and intended to move to Hong Kong after retiring. | |
| “For those born to British parents the chancellor has made domicile part of your DNA,” said David Kilshaw at accountant EY. “A person born to a British father can no longer go offshore for a few years to acquire non-dom status. Goodbye to Gulliver’s travels.” | |
| Curbs on non-doms were first proposed by Ed Miliband during the general election. Osborne stopped short of Labour’s proposals to completely end the status, saying this would cost the country money in lost tax receipts, but he condemned its “fundamental unfairnesses”. | Curbs on non-doms were first proposed by Ed Miliband during the general election. Osborne stopped short of Labour’s proposals to completely end the status, saying this would cost the country money in lost tax receipts, but he condemned its “fundamental unfairnesses”. |
| The tax campaigner and barrister Jolyon Maugham, who helped draw up Labour’s non-domicile proposals for the election, dismissed Osborne’s proposals as “seriously flawed”. He said: “Wealthy foreign non-doms will still be taxed more favourably than those whose domicile is in the UK. The fundamental injustice of the regime remains.” | |
| Some 114,000 UK residents currently claim to be non-domiciled, of which 1,750 were born in Britain. The status allows many to only pay tax on UK earnings, and avoid inheritance taxes. But the rule has been subject to widespread abuse, with wealthy residents owning UK assets such as homes and art collections through offshore companies in order to avoid UK tax on increases in their value. Others have lived in UK homes but banked their fortunes in countries like Switzerland and Singapore, helping them avoid tax in both their countries of origin and in Britain. | Some 114,000 UK residents currently claim to be non-domiciled, of which 1,750 were born in Britain. The status allows many to only pay tax on UK earnings, and avoid inheritance taxes. But the rule has been subject to widespread abuse, with wealthy residents owning UK assets such as homes and art collections through offshore companies in order to avoid UK tax on increases in their value. Others have lived in UK homes but banked their fortunes in countries like Switzerland and Singapore, helping them avoid tax in both their countries of origin and in Britain. |
| Related: Non-dom status: living and working in the UK, without paying all your tax in the UK | Related: Non-dom status: living and working in the UK, without paying all your tax in the UK |
| Under current rules, those resident in the UK for more than seven years are required to either pay UK tax on their worldwide income, or pay an annual charge that ranges from £30,000 to £90,000, depending on how long the individual has lived in Britain. The latest figures show that in 2012-13, some 5,080 paid the annual charge. These are the individuals most likely to decide to cut short their stay in Britain. | Under current rules, those resident in the UK for more than seven years are required to either pay UK tax on their worldwide income, or pay an annual charge that ranges from £30,000 to £90,000, depending on how long the individual has lived in Britain. The latest figures show that in 2012-13, some 5,080 paid the annual charge. These are the individuals most likely to decide to cut short their stay in Britain. |
| The chancellor also vowed to close the property loophole which allows non-domiciles to avoid tax on UK homes by holding them in offshore companies. And within two years, inheritance tax will be payable on all UK residential property owned by non-domiciles. The measures will be introduced in a 2016 Finance Bill. | The chancellor also vowed to close the property loophole which allows non-domiciles to avoid tax on UK homes by holding them in offshore companies. And within two years, inheritance tax will be payable on all UK residential property owned by non-domiciles. The measures will be introduced in a 2016 Finance Bill. |
| The decision to allow non-domiciles to live and work in the UK for 15 years will come as a relief to banks and hedge funds, which rely on cohorts of foreign high flyers whose wages are often paid via offshore companies despite the fact that their work is carried out in London. Falling into the category of UK employed non-domiciles are high profile City figures like the bank of England’s Canadian governor Mark Carney and Royal Bank of Scotland chief executive Ross McEwan, who was born in New Zealand. | |
| Until 2010, non-doms were allowed to avoid tax while at the same time sitting as legislators in both houses of parliament. Reforms saw the MP Zac Goldsmith and peer Swraj Paul renounce their non-dom status to hold on to their seats. Architect Norman Foster chose instead to renounce his seat in the Lords and keep his valuable non-dom status. | Until 2010, non-doms were allowed to avoid tax while at the same time sitting as legislators in both houses of parliament. Reforms saw the MP Zac Goldsmith and peer Swraj Paul renounce their non-dom status to hold on to their seats. Architect Norman Foster chose instead to renounce his seat in the Lords and keep his valuable non-dom status. |
| Successive governments of all colours have shied away from reforming the anomaly, which dates to the introduction of income tax on foreign earnings in 1914, when the UK government was trying to cover the cost of the first world war. It attracted Greek shipping tycoons to London in the 1960s, and waves of Indian, Russian and European tax exiles in subsequent decades. | |
| Optimistic costings | Optimistic costings |
| The chancellor is claiming his tax dodging clampdown will generate £5bn a year, but a glance at the red book – which contains Treasury costings for the budget – and a look back at previous performance shows the true figure is likely to be much lower. | The chancellor is claiming his tax dodging clampdown will generate £5bn a year, but a glance at the red book – which contains Treasury costings for the budget – and a look back at previous performance shows the true figure is likely to be much lower. |
| This is because Osborne’s number includes not only receipts from tackling avoidance and evasion, but “imbalances in the tax system”. Under this heading come the non-domiciles, who may have benefited from an unfair regime but were not actually breaking the law. | This is because Osborne’s number includes not only receipts from tackling avoidance and evasion, but “imbalances in the tax system”. Under this heading come the non-domiciles, who may have benefited from an unfair regime but were not actually breaking the law. |
| There are also big savings from reforming the climate change levy so that British taxpayers will no longer subsidise renewable electricity generated overseas – an imbalance, yes, but not a tax wheeze. Remove these two elements and the savings are £1bn a year less by the end of the parliament. | |
| The Treasury’s costings have also been over optimistic in the past. Three years ago, Osborne boasted that an agreement with Switzerland to collect tax due on fortunes stashed in secret bank accounts would be worth £3bn in its first financial year. Actually, the Swiss witholding tax raised just £800m in 2013, leaving a shortfall of 75%. | The Treasury’s costings have also been over optimistic in the past. Three years ago, Osborne boasted that an agreement with Switzerland to collect tax due on fortunes stashed in secret bank accounts would be worth £3bn in its first financial year. Actually, the Swiss witholding tax raised just £800m in 2013, leaving a shortfall of 75%. |