Labour’s plan to abolish the ‘non-dom’ taxpayer status – political gameplaying at its most blatant – Miles Dean
In light of the news that a future Labour government would abolish the “non-dom” taxpayer status, Miles Dean, Head of International Tax, explains that the announcement is a blatant example of political opportunism, in The Express.
Miles’ article was published in The Express, 26 April 2022, and can be found here.
Much of politics is devoted to opportunism: seizing the moment to make a good policy headline. Such is the case with the shadow chancellor, Rachel Reeves, who announced today that a future Labour government would abolish the UK’s ‘non-dom’ tax status and replace it with a scheme for those who stay in the UK for up to five years. Currently, UK resident ‘non-doms’ enjoy tax-free status on foreign earnings and gains for up to 15 years.
The term ‘non-doms’ (non-domiciled individuals) applies to a UK resident whose permanent home (their domicile) is outside the UK. It is a common law concept used by the courts to determine which legal system applies to an individual, where that individual has connections with more than one jurisdiction. It is used in our tax code to determine an individual’s exposure to UK taxation and is completely separate to nationality, citizenship or residency status. ‘Non-doms’ only pay UK tax on income or gains that sourced in the UK, not on money earned elsewhere – unless it is paid into a UK bank account.
Labour’s opportunism was provoked by Akshata Murty, the multi-millionaire wife of the current chancellor, Rishi Sunak. Her ‘non-dom’ status has enabled her to save more than £11.6m in the last tax year on dividends from Infosys – her family’s IT services business, which is headquartered in India.
Predictably, the sudden announcement that Labour would abolish the ‘non-dom’ status has made big headlines. Good politics, perhaps, but poor judgment too.
Contrary to several media reports, the ‘non-dom’ tax status is not a loophole, but rather a specific provision within the UK tax code aimed at attracting wealthy foreigners to the UK. Successive Labour and Conservative governments have encouraged its use for decades, although it has equally been used as a political football over the same period leading to it being watered down (and made more complex in the process).
Murty used these rules as they were intended. But in the eyes of some commentators, the fact that she is wealthy and married to the chancellor somehow disqualifies her from acting legitimately.
Sunak has been an MP since 2015, but only became chancellor in 2020. The moral outrage expressed over Murty’s actions as his wife is distinctly misplaced. When previous Labour politicians have repeatedly stated that they plan to scrap the ‘non-dom’ regime, they have invariably neglected to mention that their party has also benefited from large donations by various prominent ‘non-doms’ – Sir Ronald Cohen, Lakshmi Mittal and Lord Noon, to name but a few.
Perhaps this time, Labour will eventually follow through with its commitment on ‘non-doms’ if they win the next general election. But to win, they will need more than policies that appear to be motivated, at last in part, by personal attacks. They will need policies based on real substance, rather than just pure envy.