Record fall in number of non-domiciled taxpayers as tax changes and Brexit bite

• Tax take from UK resident non-domiciled taxpayers plummets by 21% in one year
• Brexit uncertainty may be deterring non-doms from settling in the UK

The number of UK resident non-domiciled taxpayers and the amount of tax they are paying has seen a record fall in the past year, according to figures published by HM Revenue & Customs (HMRC) and seen by Price Bailey, the Top 30 accountants.

There were an estimated 78,300 individuals claiming non-domiciled taxpayer status in the UK on their Self-Assessment tax returns in 2017-18. This is down from around 90,500 in previous year, a fall of 13.5%.

The number of those individuals which were UK resident fell by 16%, from 75,900 in 2016/17 to 64,100 in 2017/18.

In 2017/18, the amount of UK Income Tax, Capital Gains Tax and National Insurance contributions paid by all non-domiciled taxpayers was estimated to be £7,5 billion. This is a 21% fall from the 2016/17 number of £9.5 billion.

According to Price Bailey, HMRC is claiming that these numbers represent a success on the basis that many of these people have given up their non-domiciled status and become domiciled, resulting in no loss of revenue for the Exchequer.

Aaron Widdows, Partner at Price Bailey, comments: “While some people have opted to pay tax on their worldwide income and gains, it is likely that tax hikes aimed at non-domiciled taxpayers have dissuaded many from coming to the UK in the first place. Even though HMRC may not have lost revenue, it might have brought in even more revenue if higher taxes have scared off wealthy foreigners.”

“Brexit could to be a factor in discouraging non-doms from settling in the UK and prompting some to leave. These people are very geographically mobile. It is likely that many non-doms will have looked at the political and economic uncertainty in the UK and decided that they are better off elsewhere. Non-doms invest large sums of money in the UK and create thousands of jobs and we should be encouraging inward investment into post-Brexit UK.”

Price Baily points out that the rules for deemed domicile took effect from 6 April 2017, and this is why many may have declared themselves as UK domiciled from 2017/18. In 2015/16 and 2016/17 only there was the potential to pay the remittance basis charge of £90,000. It is now impossible to pay that due to the 15-year rule, and so that might be a reason for a drop in the tax take, too.

He adds: “The rules for the remittance basis of tax are quite complex. People often assume that a remittance is simply a transfer of funds from an offshore bank account but purchasing assets in the UK using money from an overseas bank account also counts as a remittance. There are all sorts of ways non-doms could be liable for tax charges. The complexity of the rules and the higher remittance basis charge will have persuaded many to have become domiciled, leave the country or not bother coming in the first place.”