Labour vows to scrap non-dom tax status

8 Apr 15

Labour would abolish the non-domicile tax status that allows some UK residents to avoid paying tax on all of their income, Ed Miliband has announced.

In a speech in Warwick today, Miliband said a Labour government would ‘put the fight against tax evasion and tax avoidance at the very heart of our mission for our country’ by ending the permanent use of non-dom status.

The retention of non-dom status has become ‘a symbol of the failure to act’, Miliband said, allowing some people who live in Britain to avoid paying the same income or capital gains tax on overseas income that residents are required to pay.

People can qualify for non-dom status through methods that include holding a bank account abroad or even subscribing to a foreign newspaper, he said. Ending this situation for an estimated 116,000 people could raise hundreds of millions of pounds.

‘Why should people be able to enjoy all the virtues of our great country and not pay tax like everyone else?’ Miliband said.

‘Why should there be one rule for some and another for everybody else? It is not fair, it is not just and it holds Britain back.’

Labour said it would introduce reforms so that everyone permanently resident in the UK would pay tax in the same way. Some temporary residents would continue to only have to pay tax on what they earn here, provided they stay in the country for only a limited period, which the party has still to set.

However, Chancellor George Osborne said Labour was not abolishing non-dom status in all cases.

‘Either they are going to abolish non-dom status altogether which would cost our country hundreds of millions of pounds in lost tax revenues and lost investment – the reason they did nothing on this during 13 years in office – or they are just tinkering around the edges and making small adjustments to the rules on how long people can be non-dom.’

Osborne said the coalition government had raised more money from non-doms than any previous government by imposing higher charges for those claiming the status, up to £90,000 a year.

Liberal Democrat Chief Secretary to the Treasury Danny Alexander added that Labour had failed to take action before 2010 to make rich non-doms pay their fair share.

‘We came down hard on those who stayed in the UK for long periods without paying their share – increasing charges on non-doms year-on-year since 2010.

‘In the next parliament we want to go further by radically reforming the rules and significantly increasing the charges for non-doms to secure an extra £500m for the public purse. We will ensure that non-dom status cannot be inherited, and that long-term residents in the UK pay tax as residents.’

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