Labour pledges to end non-dom tax status for most

Labour will end the tax breaks enjoyed by 116,000 'non-doms' currently living in the UK, if the party wins next month's general election, leader Ed Miliband has said.

Briefcase with words Taxes HM Revenue & Customs
The undertaking brought a warning from Conservative Chancellor of the Exchequer George Osborne that Britain would lose hundreds of millions of pounds in revenue if non-doms fled the country.Under arrangements that have remained largely untouched for 200 years, non-domiciles are defined as British residents who pay tax on their UK earnings because their permanent homes are deemed to be outside the UK.They escape paying UK tax on foreign income as long as they do not transfer it to the UK, under a non-dom regime regarded as one of the most benign among developed countries.Mr Miliband said the arrangement could no longer be justified, as it made Britain an "offshore tax haven for a few" wealthy individuals. However, he suggested non-dom tax breaks would still be allowed for "real temporary residents", though he did not spell out details.Seizing on the vagueness of the plans, Mr Osborne said, "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 – or they are just tinkering around the edges and making small adjustments to the rules on how long people can be non-dom."This confusion is another reminder of why they can't be trusted with our economy."Labour's opponents also accused Labour of presiding over a huge expansion of the number of non-doms when they were in power for a decade after the turn of the century.However, Ed Balls, Labour's shadow Chancellor, told BBC Radio 4 that the large budget deficit meant that circumstances had now changed."The abuse is bigger than we thought," he said. "These rules are ridiculous, they are unfair, they are being abused, and I think it's time to act."These were introduced in the period of the Napoleonic wars to allow people who were earning money in the colonies not to pay tax in the UK. That's fine, (but) it's a different world now, a different time, different choices."Mr Balls did say, however, said that a Labour government would allow "a short period for existing non-doms to get their affairs sorted out".When asked about who might be exempted from the new rules, he said, "What we will do in the future is if people are coming here temporarily to work or to study, then we'll allow a short period."I think five years is probably too long. I'm thinking more the length of a normal post-graduate or university degree, say two to three years."To qualify as a non-dom, a person normally has to be born abroad or have a father (but not mother) who was born abroad.The last Labour government introduced a £30,000 charge for non-doms resident in the UK for seven of the previous ten years. Last December, Mr Osborne announced a £90,000 charge for non-doms who have lived in the UK for 17 out of 20 years.