Experts react to 'stabilised' UK non-dom numbers after 60% collapse

Numbers of non-doms have stabilised after the significant post 2017 government reforms, with some some caveats around the exact figures, among expert reaction to the latest annual statistics released yesterday by HMRC.

Rosie Hooper, chartered financial planner at Quilter, said: "Non-doms are a political hot potato. Vilified during the 2015 general election, non-doms have now largely fallen off the political radar, despite being the hot topic of the Cameron era.

George Osborne hoped his 2017 reforms, announced in 2015, to abolish ‘permanent non-domiciles' avoiding UK tax on overseas income and gains and stopping individuals born in the UK claiming non-dom status, would raise millions for the Exchequer."

She added: "Instead, the reforms have been a bit of a damp squib. Rather than increasing the tax take, the number of non-doms has collapsed by 58% since 2015/16 and the tax take for non-domiciles has reduced.

Given the rate of decline in the number of non-doms has largely stalled, only falling under 4% between 2018/19 and 2019/20, it seems the number of non-doms is now stabilising at a permanently lower level."

While Richard Bull, private clients partner at Crowe pointed out: "Number of UK resident non-doms stabilised but despite this tax receipts down. However, the figures do not include those now ‘deemed domicile' which would make a difference.

"Secondly, Business Investment Relief continues to be a valuable relief and way of attracting inward investment in the UK via non-doms who are UK residents. In 2020 500 people invested £1,031 million in qualifying UK businesses an increase of £155m on the previous year.

Whilst Brexit may have increased the number of barriers for UK businesses with the EU, non-doms have not been put off from investing more of their wealth into the UK with the benefits for the wider society this can bring."

Meanwhile, Mike Hodges, partner and head of the Private Wealth team at Saffery Champness, argued that those who were planning to leave the UK, or ceasing to claim the remittance basis of tax, have "now mostly taken appropriate action" and that it was "clear that the tax environment continues to attract non-doms and their broader investment to the UK."

"On average, non doms claiming the remittance basis continued to pay more tax than non-doms taxed on their worldwide income and gains.

"In addition, after a fall in 2018 UK business investments made by non-doms recovered to reach a new peak of over £1bn in 2019. This is a timely reminder of the value which this comparatively small community delivers to the economy and one which the government will likely take heed of as it considers future reforms.

These investment figures span the period during the Brexit negotiations, and so hopefully this upward trend of inward investment will continue to be seen in the coming years."

Hodges further said: "There are other more immediate concerns to many non-doms beyond hypothetical future tax rises, though. The incoming requirements under Making Tax Digital due to take effect in 2023 will impact not just taxpayers with UK income but also UK residents with income from overseas including, for instance, income from rented properties.

Currently UK-resident non-doms are required to report income derived from overseas which may not be liable for tax and which may not be remitted. MTD, which is an important and understandable part of the government's attempt to continue to address the persisting tax gap, will require more frequent reporting and potentially lead to both administrative headaches and potentially baseless enquiries about taxes which were never in fact due.

Non-doms will likely need to start planning now to prepare for an ever more digitally-enabled and data-led HMRC and ensure they and their business interests are set up to manage the new requirements."

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