Non doms to pay more but will gain if they invest back in Britain

Non domiciled tax payers in the UK will have to pay more under measures announced by Chancellor George Osborne today (Wednesday March 23) but not as much as some commentators have suggested.

People who live in the UK but are classed as non resident for tax purposes, already pay £30,000 annually if they have had non-dom status for seven years but Osborne has extended the levy by announcing that those who have been non-doms for 12 years will in future have to pay £50,000 a year.

He said in his speech that he had ‘always believed’ that they should pay more and added that the new charge will come into effect from 2013/14.

‘They are very welcome in this country, but I've always believed that they should pay something in return for their special tax status,’ he said, adding that there would be no more changes to non-doms' status in the current parliament.

Some believe that the tax, introduced in 2007 by the then Labour government, deters wealthy foreigners from living in the UK and had argued that a further tightening would be detrimental.

But Osborne has offered a softener. He said that taxes would be lifted on foreign income reinvested in this country in a bid to encourage non-doms to repatriate some of their wealth.

And taxes on capital gains made abroad and remitted to the UK for investing in a British business would be removed as well as scrapping the charge on income invested here.

Daniel Crowther, director at KPMG, said the changes will be broadly welcomed by the non-dom community as many will have feared far worse. ‘The increased annual rate for those who have been here for 12 years or more will be a real cost for individuals to meet, but simplification and the ability to bring money in to invest in UK businesses is a really positive step which will allow non-doms to continue to help grow the UK economy,’ he explained.

‘Other encouraging points are that the new measures will be fully consulted upon, in contrast to the wholesale changes to non-dom taxation in April 2008 and also the confirmation that the Government plans no other substantive changes to the taxation of non-doms for the remainder of this Parliament will be seen as comforting noise when many have called for the non-dom rules, and the benefits they can bring to some, to be radically overhauled,’ he added.

The changes announced by the Government today will not come into effect until April 2012 and will be the outcome of consultation that will commence in June 2011.