Anger as rich get away with it

It is perhaps therefore not surprising to discover a simmering sense of grievance when one hears about others in the UK who appear to be getting away with paying considerably less tax than seems appropriate to their income.

Prior to the Budget the press rammed the message home with stories about Hans Rausing, ‘Britain’s richest man’, and the small amount of tax he apparently pays. Rausing is not domiciled in the UK and consequently is able to arrange his tax affairs so that his overseas income does not fall into the income tax and capital gains tax net.

The mood generated by such articles appears to have led to the announcement by the Treasury that there will be a review into the issues relating to domicile and residence. We have been here before. A review last took place in 1995 and the consultation process then, as in previous cases, led to the issue being left on the ‘too difficult’ pile. It is hard to assess if this time will be different but one hopes that common sense will prevail.

There are considerable downsides to substantially changing the existing system. Many individuals in the UK who are non-domiciled contribute to UK growth and economic success. Their businesses provide jobs and they contribute to the VAT tax take. A draconian change to tax rules could lead such individuals to move elsewhere or at least curtail UK operations. The potential losses could far outweigh the relatively low tax take a rule change might bring in.

Even those who would argue strongly for rule changes would appreciate that any major changes to the existing regime would create considerable problems for those affected. These individuals would need to reconsider and perhaps unravel existing contract arrangements for themselves which had been formulated under the current rules.

With a review document promised for the autumn, there is still some time for the government to take informal soundings on whether any rule changes are necessary or applicable. While there are good reasons to seek simplification and clarity in this difficult area of tax, there are also strong reasons to think very carefully before making any change.

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