TaxPersonal TaxFaults exposed in non-dom regime

Faults exposed in non-dom regime

Government already has significant problems policing non-doms rules, and further holes are appearing in its regime

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The government’s regime for non-domiciliaries may be full of holes, figures
released by the Treasury this week reveal.

As the row continues over how many non-doms there are in the UK that could
face a £25,000 levy proposed by the Tories, details of the Treasury’s
controversial costing of the proposal revealed that the government already has
significant problems policing the rules.

Buried in the small print of the Treasury’s costings was the admission that
the non-doms pay just £25m a year tax on their overseas income and gains.

Non-doms are allowed to avoid tax on their offshore income, often in places
like Monaco and Switzerland, as long as it is not brought back to the UK. But
the £25m figure suggests that the regime for policing those ‘remittances’, as
they are known, is not watertight.

Assuming a 40% tax rate, the Treasury number suggests they remit just £62.5m
to the UK annually – enough for the wealthiest non-doms to buy one large house
in an affluent area of London. The actual figure is thought to be far higher,
but the non-doms are thought to use complicated avoidance methods for bringing
the cash back.

The figures suggest HM Revenue & Customs is struggling to counter such
devices despite, four years ago, creating dedicated ‘complex personal return’
units whose main targets include compliance by non-doms.

The news came as the Tories and Labour squared up on the non-dom issue. Prime
minister Gordon Brown said this week that he thought there were only a few
thousand non-doms who could pay the Tories’ charge, adding: ‘Only several
thousand people are capable of paying the money that’s being talked about, and
to most people in the tax industry and accountancy industry this is very well
known.’

The comments were greeted with scepticism by some. One tax adviser told
Accountancy Age: ‘If there are only a few thousand, I must act for all
of them.’

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