Labour to abolish non-dom tax status if elected

Published by Scott Challinor on April 26th 2022, 12:00am

The Labour party has reiterated plans to abolish what it calls “unfair” and “outdated” non-dom taxpayer status if elected to government.

Non-dom tax status enables UK residents whose permanent home is registered abroad to avoid paying UK tax on their income from overseas.

Shadow chancellor, Rachel Reeves [pictured], called the special status an “outdated” tax perk and explained that a shorter-term “clear, simple and modern” tax scheme for temporary residents would be introduced by a Labour government to replace it.

Labour has previously committed to abolishing the special status under the leadership of Ed Miliband and Jeremy Corbyn, and has again declared its intent to replace it following its latest tax policy review.

The alternative arrangement could last “between six months and five years” for qualifying residents according to Reeves, who added that the party would consult on the plan with businesses before it is enacted.

Reeves said: “We need to do more to crackdown on some of the [tax] loopholes, which mean some of the wealthiest in society aren't paying their fair share of tax.

“If you make Britain your home, you should be paying your taxes here.

“With Labour, people who make the UK their home will contribute to this country by paying tax on their global income.”

She emphasised that those with non-dom status had “an important role” to play in “funding our public services”, with their tax contributions estimated to be worth around £6 billion per year.

Non-dom tax status has recently been thrust into the public eye following a row over Akshata Murty, the wife of chancellor Rishi Sunak, benefiting from it.

The BBC reports that Murty's special tax status could’ve prevented her from paying an estimated £2.1 million per year in UK tax on dividends received from her father’s software company, Infosys, based in India.

After the tax row broke, Murty said that she would maintain her non-dom status but would begin to pay UK tax on her income from overseas.

In spite of the row, the Treasury has defended non-dom status as a means of enticing “talent to work and live in the UK” and argued that 2017 reforms have already ensured that permanent non-dom status is abolished and “those who choose to live here for a long time pay their fair share of tax”.

Non-doms are currently able to retain their special tax status in the UK for up to 15 years.

According to recent figures published by HMRC, 75,700 people claimed non-dom status in the UK during the April 2019 to April 2020 tax year.

Image taken from Wikimedia Commons

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Scott Challinor
Business Editor
April 26th 2022, 12:00am

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