Who Trains These People?

Who is actually training journalists about the subjects they write upon? Anyone?

He is expected to make an audacious raid into Labour\’s natural territory by promising a clampdown on so-called "non-doms" – non-domiciled workers who live in the UK but are not registered to pay tax…

That\’s not what a non-dom is. We make two distinctions in UK tax law, between residents and those who are domiciled. Roughly speaking where you are resident is a year by year thing, domicile is a life-long thing (although it is possible to change it). I\’m reasonably sure that we\’ve got this distinction (which I\’m not sure that anyone else really has, at least not in quite the same form) because until the last decade or so it brought more tax money in that it lost. Because you could run off to Monaco or wherever and lose your residency, meaning that you didn\’t pay income tax in the UK, but your domicile was much more difficult to shake off and that left (I think I\’ve got this right) your estate still to be taxed by the UK.

Still, that quote isn\’t what non-doms are. Non-doms are registered to pay tax. They pay income tax on their UK earnings, just like everyone else. However, they do not pay income tax on their non-UK earnings. That\’s the difference: if you\’re UK domiciled you pay income tax on worldwide earnings. If non-dom, only on UK.

Perhaps this system needs to be changed, perhaps not, I don\’t think it really matters all that much either way. But reporting on it and not understanding what it is is really pretty sad.

5 comments on “Who Trains These People?

  1. Osborne’s point on Today suggests some canny thinking here: £25,000 is tax, and under most tax treaties the £25,000 is lopped straight off the tax due to any other region (e.g. withholding taxes). The major effect of this is to transfer money from the US Federal maw into the UK’s, since US citizens are taxed regardless of residence.

  2. Of course they aren’t trained on the subjects they write on. It would be a sad world indeed if these people had actually been taught this stuff but were so stupid that they didn’t take it in, and yet are supposedly the cream of UK journalistic talent (on the basis that they are writing in the national media).

    Oh, wait.

  3. That’s the difference: if you’re UK domiciled you pay income tax on worldwide earnings. If non-dom, only on UK.

    Uh, Tim?

    That’s residency / non-residency, no?

    If you are resident, but not domiciled in the UK, you must pay the full whack of tax on your UK-source income, but can elect to only pay tax on foreign-source income when/if it is remitted to the UK.

    If you aren’t resident in the UK, you pay UK tax on UK-source income and no tax at all on all other income, regardless of your domicile.

    Tim adds: Sorry, I know I wasn’t clear there. Let’s assume you are resident: what’s then the difference between being dom or non dom? Whether you pay on worldwide or just UK income.

  4. If you’re resident, my understanding is that you pay income tax on worldwide income, whether or not you are UK domiciled.

    The main benefits that UK resident non-doms receive relate to IHT and trusts. They have wider scope for planning, for example, trusts settled by a non-dom are excluded for tax purposes. Also, property located outside the UK belonging to a non-dom is excluded property for IHT.

    Capital gains tax is a bit different, because the rules for that depend on whether or not the taxpayer is ‘ordinarily resident’.

    This is not exactly my area of tax practice, so perhaps someone can shed more light.

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