Labour pledges to replace non-dom tax statuson April 25, 2022 at 5:00 am

Labour has pledged to replace the so-called “non-dom” taxpayer status in the UK after a row over the finances of Chancellor Rishi Sunak’s wife.

The party said the status was unfair. It allows UK residents whose permanent homes are abroad not to pay UK tax on overseas income.

Instead, it would introduce a shorter-term scheme for those staying in the UK for up to five years.

Shadow chancellor Rachel Reeves said it would end “outdated tax perks”.

Currently, non-doms can keep the status for up to 15 years.

Labour has previously been critical of the non-dom arrangement, and had pledged to scrap it under former leaders Jeremy Corbyn and Ed Miliband.

The party said its decision to recommit to removing the status came as part of a wider review of its tax policies, announced by Ms Reeves at Labour Party conference in September.

But it also follows a row earlier this month after emerged that Mr Sunak’s wife, Akshata Murty, had claimed non-dom status through her father, Narayana Murty – the billionaire founder of Indian software giant Infosys.

The BBC estimated this would have saved her £2.1m a year in UK tax on dividend payments from her shares in the company.

After a political backlash, Ms Murty announced that although she would remain a non-dom, she would pay UK tax on her overseas income.

Labour has said, if it wins power after the next general election, it would replace the status with a shorter term arrangement similar to those in France, Germany and Canada – likely to last for up to five years.

It has not provided further details of its plan, but said it would be a “clear, simple, and modern system”, and it would consult on the terms after gaining power.

Ms Reeves added: “As the Tories raise taxes on working people, it simply isn’t right that those at the top can benefit from outdated non-dom tax perks.

“With Labour, people who make the UK their home will contribute to this country by paying tax on their global income.”

A non-dom is a UK resident who declares their permanent home, or domicile, outside of the UK.

A domicile is usually the country his or her father considered his permanent home when they were born, or it may be the place overseas somebody has moved to with no intention of returning.

For proof to the tax authority, non-doms have to provide evidence about their background, lifestyle and future intentions – such as where they own property or intend to be buried.

Those who have the status must still pay UK tax on UK earnings, but do not need to pay UK tax on foreign income.

They can give up their non-dom status at any time.

According to the latest figures from HM Revenue and Customs, there were 75,700 people claiming non-dom status in the UK in the tax year ending 2020.

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