Sunday, August 7, 2022

Figures show nearly 70,000 people are using non-dom status to cut tax bills

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Nearly 70,000 people used non-domicile status to cut their tax bills, according to new figures from HMRC.

In the tax year ending 2021, 68,300 people took advantage, compared to a pre-COVID figure of 76,500. The pandemic was cited as a likely reason for the decline.

The data comes amid heightened interest in the tax break following revelations about how it was used by world leaders and their families.

Conservative leader Rishi Sunak’s wife, Akshata Murty, used the status as she lived at Downing Street while her husband was Chancellor. LatestPageNews unveiled in April. Ms. Murty then undertook to stop using the status.

Another former Chancellor, Sajid Javid, used an offshore trust to maintain the benefits of Non-Dom status while he was MP and worked as a ministerial assistant at the Treasury. LatestPageNews reported earlier this month.

Arun Advani, Associate Professor at the University of Warwick, said of the figures: “This is a reminder that while the Non-Dom regime is alien to most people, taking advantage of this tax break is common among the wealthiest.

“The latest figures show that utilization of this tax benefit remains high and continues to cost the Treasury money during a cost-of-living crisis.”

Using what is known as non-dom status allows individuals to pay no tax on their worldwide income, unlike other ordinary taxpayers who must pay income tax on all income, whether domestic or foreign.

It can be claimed on a remittance basis on an individual’s tax return and is costly to retain over time. A person must pay £30,000 per year if they have resided in the UK for at least seven of the previous nine tax years, rising to £60,000 if they have resided in the UK for at least 12 of the previous 14 tax years.

Non-Doms can stay in the UK 365 days a year, although there are said to be limits on how long they can use the status to help lower their tax bills. Status should only be used on a tax return if an individual has lived in the UK for less than 15 of the last 20 years.

However, the creation of offshore trusts, often based in tax havens, can allow individuals to maintain some of the tax benefits that come with utilizing non-dom status.

There is no clear evidence of how much the tax benefit can cost or benefit overall taxes collected by the country.

A new analysis from the London School of Economics and the University of Warwick shows that one in seven billionaires on the 2020 Sunday Times Rich List (STRL) is unlikely to be resident in the UK for tax reasons.

However, of STRL members who live full-time in the UK, almost a third, 28 per cent (251 people), are likely non-Dom. That equates to 0.1 per cent of the broader UK population.

Andy Summers, associate professor at the LSE Inequalities Institute, said: “Around half of billionaires have significant connections abroad. But those further down the list appear to have more UK roots, with only one in five living or hailing from abroad.”

One in seven billionaires, 14 percent, lives in countries with zero or low taxes, according to the study. Popular locations are Monaco (27 people), the Bahamas (5) and the United Arab Emirates (5).

Hannah Tarrant, Research Officer at the LSE Inequalities Institute, said: “Although many in the UK own substantial wealth, it is astonishing to see that one in seven billionaires live in a tax haven.”

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