A Labour government would see the sun set on non-doms

Ed Miliband has pledged to do away with non-domicile status and the tax exemptions that come with it

A Labour government would see the sun set on non-doms

There are many outmoded laws in the UK that no longer seem relevant. Under the 1867 Metropolitan Streets Act, for example, it is illegal to drive cows through urban streets between 10am and 7pm ‘except with the permission of the Commissioner of the Police’. Unless you still sell livestock on the streets of London, we’re sure you’ll agree that this law is rather inconsequential in the modern day.

Does the same hold true for laws surrounding non-domicile status? After all, it was Tory prime minister William Pitt the Younger who introduced the law in 1799 during the Napoleonic wars to allow many of Britain’s richest permanent residents to avoid paying tax in the UK on their worldwide fortunes. Today non-domicile status is claimed by 116,000 UK residents meaning that for an annual charge of between £30,000 and £90,000, they don’t have to pay UK tax on their overseas income. 

The Labour Party definitely thinks it is time to do away with this archaic piece of legislation, pledging to abolish non-domicile status for extremely wealthy individuals, a move that it claims will raise hundreds of millions of pounds in tax. “Why should there be one rule for some and another for everybody else?” Labour leader Ed Miliband said in a speech in Warwick yesterday. A Labour government, he claimed, would “put the fight against tax evasion and tax avoidance at the very heart of our mission for our country”. The party would, however, permit a two-year grace period to allow people to adjust their finances and circumstances to the UK. 

Only last week, former Dragon’s Den star Duncan Bannatyne was one of 103 businesspeople who signed a letter endorsing the Conservative economic policy. Yesterday he suggested he will back Labour because of Miliband’s pledge. “This gets my vote [as] I never thought any party would have courage to do this,” he tweeted.

However, Labour’s proposal obviously doesn’t please everybody. According to the London Evening Standard’s front page yesterday, the capital is in ‘backlash’ against the proposed reform. Although former director and minority shareholder in the Standard, Jonathan Harmsworth, 4th Viscount Rothermere, is himself a high-profile non-dom, we trust there was no vested interest on display on the pages of this particular London tabloid.

Simon Walker, director general of the Institute of Directors, said that scrapping non-dom status is “a shrewd political move” but the economics are “unconvincing”. “It’s very unclear what additional revenue would be raised, but the UK’s international reputation would be put at risk,” he said. “This country has benefited enormously from attracting some of the most successful businesses and entrepreneurs in the world, with the previous Labour Government recognising the benefits of an internationally competitive tax system.”

However, if so many wealthy individuals would be queuing up at our ports to leave the UK as the result, how does New York have more billionaires – and higher taxes – than London? The Conservative Party, which criticised Miliband’s plan, has also made a pledge of its own on non-doms. George Osborne is looking at plans to abolish the hereditary aspect of the 200-year-old rule where the children of non-doms can inherit the privileged status from their father.

While the issue of non-doms has dominated the headlines for only 24 hours, it already seems that no matter who wins the election next month, the days of non-domicile status as we know it are numbered. 

Ryan McChrystal
Ryan McChrystal

Share via
Copy link