A future Labour government would abolish the non-domicile status that allows some wealthy UK residents to avoid paying UK tax on earnings made outside the country.
Labour leader Ed Miliband described the “non-dom” rules as an “arcane” and “indefensible” way for the wealthy to maintain an “off-shore tax haven”.
In a speech at the University of Warwick, Miliband said:
“There are people who live here in Britain like you and me, work here in Britain like you and me, are permanently settled here in Britain, like you and me, were brought up here, but just aren’t required to pay taxes like you and me.”
Shadow Chancellor Ed Balls claimed that scrapping the rule could raise “hundreds of millions of pounds”, but this is a complete reversal of his claims earlier this year when he warned that abolishing “non-dom” status could cost Britain money if the wealthy moved their country of domicile elsewhere.
The government defines non-domiciled residents as “UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income”.
The status was created during the days of the British Empire, when those working throughout the realm chose to maintain the UK as their country of domicile for legal and financial reasons.
Under current rules, non-dom residents, such as Chelsea boss Roman Abramovich or a number of current and former political donors for all parties, pay a charge of at least £30,000 instead of paying tax as a UK resident.
In the Autumn Statement in December, Chancellor George Osborne announced that people who have lived in the UK for 17 of the last 20 years, but claim non-dom status for tax purposes will be subject to a new £90,000 charge. However, he warned that Labour’s plans to scrap the status would result in “economic confusion”.