Monday, 13 April 2015


In an election period government departments are reluctant to answer any questions that could be politically sensitive. They call it ‘purdah’ – a term which in fact describes the practice of some religions to hide women from the public gaze, especially that of men from outside their families.

So when I asked HMRC on 8 April for some figures which it had already made public through Freedom of Information requests I perhaps should not have been surprised when it refused to send them to me, citing ‘purdah’ for refusing. In Civil Service language purdah clearly means hiding facts from the public gaze just when men and women outside the political family need to see them most - when they are making decisions about political matters!

These now redacted figures cast light on non-doms - the 100,000 or so people who live and often work in the UK but are not ‘domiciled’ here. Hence non-dom(iciled). 

I learned about the existence of the numbers when some were published in a letter to the Financial Times on 8 March by a Mr Mark Davies. I wanted to check them with HMRC and that is when it drew the veil of purdah over them. Fortunately Mark himself was more forthcoming. Though I should say right away that Mark Davies Associates is a firm of tax advisers with the website Guess what it advises on! So Mark is not a disinterested party. 

What is a non-dom?
The figures later. But first what is a non-dom? The concept of domicile is a strange – and strangely British – one. It dates back to 1799 when the first income tax was imposed by Pitt the Younger to raise money to fight Napoleon. Under the Duties on Income Act 1799 (39 Geo. III c.13) the tax was 10% on all income above £200 a year with lower rates on income from £60 to £200. 

From the start the tax applied to all residents on their income arising in the UK or elsewhere and on non-resident subjects on any income on property that arose in Great Britain. At the time many people from the UK lived, worked, invested in, and profited from countries around the world that were part of the British Empire. It was seen as reasonable that money brought to the UK would be subject to the new tax. But overseas earnings which were spent and invested abroad should not be caught, even if the individual spent much of their time in the UK. The notion of ‘domicile’ was born. 

Nowadays, domicile is where you call home. Your original domicile is the country that your father (or your mother if they were not married) called home when you were born. That stays with you unless you choose to change it. To do that you must live somewhere else and call that place your home, probably plan to die there. Once you have changed your domicile that stays with you wherever you travel or stay unless you change it again. So UK citizens can change their domicile and keep that foreign domicile even if they return to live and work in the UK. HSBC Chief Executive Stuart Gulliver does just that – born in Derby his domicile is Hong Kong where he worked for many years and where he says he will return when his work in the UK is done.

For a registered non-dom any income (or capital gain) from outside the UK is taxed where it arises and is only taxed in the UK if it is brought here. That means the complex rules on domicile can be exploited by wealthy UK residents with worldwide income to reduce their UK tax liability. 

The idea of taxing non-doms further was first proposed by George Osborne, then shadow Chancellor, in 2007.In his speech to the Conservative Party conference on 1 October he promised "a flat annual levy of around £25,000 for those who register for non-domicile status".The idea was taken up by the Labour Government and from April 2008 a flat rate non-dom tax charge was introduced by the Chancellor Alistair Darling at £30,000 for non-doms who had lived in the UK for seven out of the last nine years. 

A higher band of £50,000 for those here for 12 out 14 years was introduced by George Osborne as Chancellor in the Coalition Government of 2010-2105. The higher charge began on 6 April 2012. And from 6 April 2015 a new maximum charge of £90,000 is levied on those who have lived here for 17 out of the last 20 years. 

Even after the change the Government said the system “remains a very generous tax regime.” Not least because in the first seven years of UK residence no charge is made. 

Non-doms and what they pay
So, the numbers. The figures provided by HMRC under the FoI request of Mark Davies show that out of the 110,700 UK resident non-doms in 2012/13, 64,000 of them chose not to take advantage of their status and were taxed here on their worldwide income. The remaining 46,700 chose to be taxed on foreign income only if it was remitted to the UK. And of those only 5000 actually paid the flat-rate charge. Which implies the other 41,700 had been here for less than seven out of the last nine years. Altogether those 46,700 paid £4.6 billion in income tax in 2012/13. Which indicates an average taxable income in the UK of around £240,000. The remaining 64,000 who avoid the flat-rate charge by paying their tax normally handed over average income tax of £24,687 – suggesting an average taxable income of around £87,000.

Those are the figures that HMRC decided to veil from the public gaze just at the time when that same public was trying to decide whether scrapping the concept of domicile would raise – or cost – the UK money. Thanks a bunch. 

I should add that the figures that HMRC was willing to reveal were slightly different giving the number of UK resident non-doms in 2012/13 as 114,800. That could be because the FoI figures relate only to those who complete a self-assessment tax return. But until after the election I shall not be able to clarify that.

13 April 2015
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This blogpost is a longer version of the introduction to my Money Box newsletter of 11 April 2015. Keep up to date by subscribing to future Money Box newsletters