Let me offer an alternative explanation that I think much more likely than this deeply politically driven hype from the firms servicing this declining market.
It costs to be a non-dom. The charge can be as much as £60,000 a year. It increases the longer a person claims to be non-domiciled.
My suggestion is a simple one. The non-doms might not be leaving. Instead I suspect they may just be choosing to pay their taxes in the UK.
Because £60,000 a year is a lot of money people will volunteer to pay more?
He’s desperate to avoid admitting that tax changes can change behaviour.
Non-Dom tax does have some logic to it. A foreign business man who moves here but still has his economic base overseas. Why does the UK deserve to tax those overseas businesses (which are dependent on the infra-structure of that overseas country)?
So the non-Dom tax system was created to restrict UK tax to the overseas income actually remitted to the UK. Fair enough when seen in that context.
The new deemed domicile rules (resident here for at least 15 of last 20 years OR born in UK and have UK as domicile of origin = deemed domicile) mean that many super-rich non-Doms will not be able to keep their non-Dom status and face huge tax bills if they don’t leave. So they are leaving.
Murphy can of course have no actual experience of advising these super-rich non-Doms. The firms that have been advising them know that they are leaving the UK.
Working backwards, you end up with a £60,000 tax/NIC bill when your income is c£151k.
Even if it is all dividend income, it’s only c£204k
Someone on, say, £5m dividend income (we are not even talking super-rich here) would be looking at a £1.89m tax bill.
Spud is asking us to believe that someone who could move and save £1.89m a year has decided to stay here and pay it.
The truth is that taxes sting and even though paying £60,000 might be cheaper than paying income taxes, it’s still not nothing. Having said all of that, even after paying £60,000 a year, if you get the rules wrong or HMRC starts hassling you over compliance you face unknown taxes, penalties and interest. Who needs that grief?
So is it really that surprising that those at the bottom end of the non-domicile regime are finding other ways of living and working that mean they are no longer subject to it?
Sure, some will restructure their affairs so that they are paying income tax at a lower rate than the £60,000 a year currently demanded, but most others will simply take behavioural steps to no longer be subject to the non-domicile regime in the first place, mostly by moving abroad (since they are “foreigners” anyway) and limiting their visits to the UK so they are no longer subject to ANY taxation.
The whole residence / domicile thing is antiquated anyway. I realise it might attract Russian oligarchs to come here rather than Singapore, but apart from the City of London’s desire to launder cash for the wealth from corrupt regimes the world over, does the general public actually benefit?
Surely, it would be far easier and healthier if we removed all of this antiquated bollocks from our tax books and simply said “If you a resident here more than 90 days a year then you pay UK taxes same as anyone else”.
This also means that when someone leaves the UK to live abroad, once they’ve paid all of their outstanding taxes they are free-and-clear. None of this, “Oh, but we classify you as UK domiciled, but non-resident, so we want 40% of your estate when you kick the bucket”.
Absolute nonsense.
“Surely, it would be far easier and healthier if we removed all of this antiquated bollocks from our tax books and simply said “If you a resident here more than 90 days a year then you pay UK taxes same as anyone else”
There is pretty strong logic to offering lower tax regimes to people who are highly mobile. Even if someone “just” paid 60k pa that is still better than nothing. This analysis also ignores the other benefits of having rich people based somewhere. You capture a bunch more in VAT, taxes on the income of locals that they employ, and a concentration of investors helps provide easier funding for new companies which is helpful for entrepreneurial cutlure and growth.
or we can ignore all those benefits and say it just about laundering dodgy money – though if your money is really dodgy London is a much more dangerous place than some others you might go to.
Why? If tax rates are too high at the top end that movement of people from New York to London stops then that should be used as the basis for lowering the taxes at the top-end for everyone, not just selectively for a bunch of bankers and oligarchs.
I have absolutely no problem with the government saying that nobody should ever pay more than say £100,000 a year in income tax and NI, regardless of where their father was born (which is a weak ass justification at best).
“Surely, it would be far easier and healthier if we removed all of this antiquated bollocks from our tax books and simply said “If you a resident here more than 90 days a year then you pay UK taxes same as anyone else””
Because the mega rich international set spend a lot of money IN the UK. They buy property, they have staff to maintain and service that property. I live next door to an estate owned by such a person (I don’t know if he’s a non-dom, but he’s a foreign citizen, has houses in multiple countries, including the south of France and Switzerland, so I’m guessing he probably is). He employs staff all year round at this estate, even though he’s only there for the shooting season. He must have put a huge amount of money into the local economy, spending on builders, contractors, landscape gardeners, buying building materials etc. He also paid top dollar for the land he bought to expand his estate, so locals benefited there too. His estate also looks a picture, he’s spent money like water on it. If it was still owned by the farmers who owned it previously it would still be covered in rusty bits of farm machinery, dilapidated farm buildings, and weed infested crops.
@Jim – As I say, if tax rates are so high that they are a disincentive then why should rich foreigners be the only ones to get a tax break?
“why should rich foreigners be the only ones to get a tax break”
because the tax rate you can impose on someone born in the UK and with their family, friends and business relationships here is quite high – too high and they move
someone who does not have the existing personal investment in the UK and is able to choose which country to move to will be more sensitive to the tax rate
and yes I know the “we can tax you more as we know where your friends and family live” is not the most moral argument (mafia anyone?) but does reflect how the world works
He’s desperate to avoid admitting that tax changes can change behaviour.
Andrew C has hit the nail on the head.
Note that in giving his three reasons why non-doms might choose to pay (more) tax in the UK, he provides absolutely nothing in the way of facts to substantiate his claim. Given that, it would appear he simply pulled out the first three reasons that came into his foot-thick skull and wrote them down.
Also note that two of the three reasons why he thinks non-doms might be paying tax in the UK don’t even make sense. Remittance accounting and HMRC status challenges can be hassles, but they are not necessarily hassles for the super-rich. If they are hassles for anyone, it’s for the financial/legal advisors employed by the super-rich. Which is why they are handsomely compensated for what they do.
The whole residence / domicile thing is antiquated anyway. I realise it might attract Russian oligarchs to come here rather than Singapore, but apart from the City of London’s desire to launder cash for the wealth from corrupt regimes the world over, does the general public actually benefit?
Anytime you write something that could be mistaken for something written by Richard Murphy, you’d do well to rethink that something.
No, Dennis, because you are taking what I said out of context (much as the Professor of Political Economy at Islington Technical College does).
My only argument being that we should not have special tax rates for foreigners (which is what non-domicile taxation is about), if taxes are too high for that it is a disincentive for foreigners coming here then that is an argument against high tax rates for everyone, not just rich foreigners.
My point being that all should be equal before the law, because as soon as you get to the point where you have different laws (even tax laws) for special groups then you are guilty of both pandering to an elite minority and hypocrisy.
No, Dennis, because you are taking what I said out of context (much as the Professor of Political Economy at Islington Technical College does).
I didn’t, but it reads just as bad ‘in context’.
My point being that all should be equal before the law, because as soon as you get to the point where you have different laws (even tax laws) for special groups then you are guilty of both pandering to an elite minority and hypocrisy.
Also Murphyesque.
“My point being that all should be equal before the law, because as soon as you get to the point where you have different laws (even tax laws) for special groups then you are guilty of both pandering to an elite minority and hypocrisy”
I don’t feel particularly pandered to by the sections of the tax code that impose an extra 5% on my tax-rate, withdraw my personal allowance, dramatically limit the amount I can save in my pension, etc etc
“if tax rates are so high that they are a disincentive then why should rich foreigners be the only ones to get a tax break?”
Because nothing about the tax system is fair. Unless everyone just pays a flat % of their income in tax, then there will always be unfairness inherent in it. Why is it fair that a person with £12.5k of income pays no tax, but a person with £12.501k pays some tax? Or that if you survive 7 years from giving your money away there’s no IHT due, but if you die a day under 7 years a huge bill will follow? Pretty much all tax systems are arbitrary, and the only rule one can hope to apply is that the State merely tries to maximise revenue, rather than being actively vindictive.
“The whole residence / domicile thing is antiquated anyway. I realise it might attract Russian oligarchs to come here rather than Singapore, but apart from the City of London’s desire to launder cash for the wealth from corrupt regimes the world over, does the general public actually benefit?”
Although if you do read my first post here you’ll see why it was introduced. It does date back 1799 mind, so antiquated it certainly is. But the intention is to get rich foreigners over here spending money and paying tax on UK generated income and UK remitted income without those rich foreigners thinking we’d be going after the things back in their home country that made them rich.
As Jim says, it’s not about ‘fairness’, it’s about maximising revenue or accepting lower revenue as a trade-off for something else.
“Remittance accounting and HMRC status challenges can be hassles”
A particular hassle if you’re a moron like Spud and you don’t know the rules.
Old style planning;
Rich foreign bloke is planning to move to UK on (say) 1 January 2010.
Open new bank account on 31 December 2009. Freeze old bank account to new deposits. Restrict transfers to UK to funds held in old bank account. All deposits in old bank account pre-date move to UK so whatever their nature, income, capital gain etc they pre-date UK residence so won’t be caught by remittance rules.
Er….that’s it.
If you run out of money you could always get your business to lend money to you. A loan is not income and can’t be taxed.
It’s really not that tricky.
+1 Andrew C
witchcraft!
Andrew C – however a directors loan account in deficit is subject to tax. Takes a little time so can be used and paid back without penalty, however longer term its an expensive tax compared to money from elsewhere.
@Martin – that doesn’t apply if it is a loan from a 3rd party company which the recipient is not a shareholder, director, officeholder or employee.
There are companies which specialise in these types of loan arrangements for millionaires / billionaires to avoid income taxes, but they require collateral and interest.
Warren Buffet was talking about some scheme that approached him a few years ago. Not saying it’s fair, but they do exist.
I hate accountants almost as much as I hate lawyers.
@Martin
We would be taking an overseas company so no s455 tax. BIK rules could be eliminated by charging interest on the loan at official rate. Currently 3.5%. And the interest would be paid to a company you own, so no loss there.
3.5% interest paid to a company you own or 45% tax to HMRC.
@John Galt.
These days such arrangements are sailing close to the wind. The anti-EBT rules brought in by Osbourne in 2010 are widely drafted. And the loan charge rules are equally blunt.
But, yes, certainly possible.
When income and wealth inequality is measured in the UK, do the stats dudes count the worldwide income and wealth of the non-doms or just that portion that has been remitted and accumulated in the UK. It would rather skew the top 0.1% data if we count all of it, and then use that to say this country must be schit.
Then again there are people like Murphy who can’t decide if the country’s already schit, or ok but going to become schit, or taking a schit from one day to the next.
@Bongo
It’s unpleasant to consider the sticky mess spud’s keyboard must be in if he’s just read on his laptop that the economy shrank last quarter. The recession he’s been predicting for the last christ knows how long could be here.
Can you imagine him?
“And twenty-fifthly, this is the recession I alone predicted and have been proved right”
Gonna need another quarters figures to start calling a recession…
Equally, with all of Treason May’s idiocy and Hammond / Carney trying to outdo each other with Project Fear v16.8, is anyone really surprised?
I wouldn’t be investing on anything other than an immediate necessities level. It’s like the ERM debacle all over again. As soon as BRExit is done and we’re clear then things will pick up rapidly.
Completely OT
Ref power outage in London, if this is true:
“The gas plant failed because it was forced to idle while it was windy. Then as fickle wind itself tripped it had to quickly power up but also tripped. Gas power stations are more efficient and reliable when they are always on. Wind is the Goldilocks power source.
https://twitter.com/clivehbest/status/1159923220948160515?s=21“
@BiND: my first thought on reading of the power cuts was ‘I bet that renewables are at the bottom of this somehow’. Its probably one of those ‘too much wind for wind turbines’ moments. I’m also convinced that if renewables are the reason for it the BBC won’t mention that fact at all.
@JG
I’m unconvinced things will pick up rapidly given the general global slowdown and the US-China trade war with other trade wars potentially on the horizon too. The turmoil on world stock markets is only in small part from Brexit uncertainty.
@MBE – If a recession is the price we have to pay for leaving BRExit, then it will be a price worth paying.