Kalyeena Makortoff
What is non-domicile status?
A person who is registered as non-domiciled with HM Revenue and Customs (HMRC) is tax resident in the UK but does not have to pay UK tax on income and capital gains earned overseas – including on company stocks or cash made from selling a second home – unless they bring their money into the UK or deposit it into a UK bank account. However, non-doms do still have to pay tax on money earned within the UK.
Who qualifies?
A person with non-dom status is someone who lives in the UK and is tax resident here, but who has their permanent home outside the country. They must demonstrate to HMRC that their domicile – at least for tax purposes – is in another country. Usually their domicile will be the country that their father considered their permanent home when they were born, and to which they intend to eventually return.
Because they are tax resident in the UK, non-doms will typically not be tax resident in their country of domicile, and not liable for tax in either country on their worldwide income.
Non-doms have to specifically apply for a tax exemption on foreign income of more than £2,000, meaning it is not an automatic designation for foreignborn residents or non-citizens.
How long does the tax break last?
After a certain amount of time, non-doms must pay a charge in order to continue sheltering their foreign income from UK tax. Those who have been living in the UK for at least seven of the previous nine tax years must pay £30,000 a year to the government. Those who have lived in the UK for 12 of the previous 14 tax years must pay £60,000 a year. UK residents must pay tax on their worldwide earnings once they have been in the country for 15 of the previous 20 years.
Foreign nationals who are resident in the UK can choose to pay British taxes at any point on their worldwide income and capital gains. They do not have to hold a UK passport to be taxed here.
Why is it controversial?
The rule primarily benefits the very rich, and has allowed those claiming it to avoid paying significant sums to HMRC.
A study by the London School of Economics and the University of Warwick found that more than two-fifths of people who earned £5m or more in 2018 had claimed non-dom status at some point since 1997.
Which big names have claimed?
Some of the most well-known people who have reportedly claimed non-dom status include Roman Abramovich, the Russian oligarch and former owner of Chelsea football club, now under sanctions, the steel tycoon Lakshmi Mittal and the media baron and Daily Mail owner, Lord Rothermere.
Akshata Murty, the wife of the ex-prime minister and chancellor Rishi Sunak and daughter of Indian IT billionaire NR Narayana Murthy, also claimed nondomiciled status.
Lord Ashcroft, multimillionaire and former deputy chair of the Conservative party, and the former HSBC boss Stuart Gulliver were also reported to have used the non-dom scheme. The same applied to Sir James Goldsmith and his children, including the Conservative minister and longtime friend of Boris Johnson, Zac Goldsmith.
The Guardian