Non-domiciled individuals and tax


British citizens with financial interests abroad can register for ‘non-domiciled status’ and are known, in shorthand, as ‘non-doms’.

Non-doms are resident in the UK but do not pay tax on their earnings outside the UK. There are around 116,000 residents registered as non-doms in the UK - these people largely work in finance, though there are also some tycoons and professional sportsmen registered.

If you are non-domiciled and want to return to the UK but are unsure of the tax implication, we can help. Equally, if you're thinking about using this status, call us for information.

Why choose non-domiciled status?

Some of the wealthiest individuals in the UK are classified as non-domiciled individuals. This category of residence is used primarily for tax purposes. Non-domiciled individuals are considered by HMRC to be:

  • Residents of the UK
  • Not permanent residents of the UK

The classification requires the applicant to declare that he or she does not plan to live in the UK permanently, but there is no restriction on how long they can stay.

The benefits derived from the non-domiciled status were traditionally quite significant, although they are only likely to be relevant to a small percentage of the overall British population. The advantage consisted mainly of the ability to avoid tax on profits gained outside the UK, as long as that money is not spent in the UK.

The origin of this rule can be found in imperialist times, when residents of the colonies were permitted to avoid paying tax on rent they were gaining in the colonies whilst they were in the UK, as long as the funds were not spent in the UK.

Changes to the law

In recent years the laws on the matter have been criticised for allowing some of the world’s richest individuals to pay little to no tax on massive profits. After a period of arguments the laws have changed and are now significantly different.

Non-doms have recently come under a variety of different pressures from the government including:

  • The introduction of a £30,000 levy because of their status. Although the £30,000 levy does not have to be paid, failure to pay it means that tax must be paid on all income including overseas income
  • Additional rules, including making non-doms unable to use overseas trusts to conceal earnings from the government, have also been introduced

Many people disagreed with the changes to the tax laws relating to non-doms, saying that unfavourable changes could encourage investors and businessmen to leave the UK to live in places with more favourable tax laws.

Conversely, many people believe the rules relating to non-doms are unfair in that they are afforded tax breaks above UK citizens. Countries such as America require all income to be taxed regardless of whether it is earned inside or outside the country.

If you are a non-domiciled individual or you are considering applying for the status, you are advised to firstly seek advice regarding the rule change. You should also try to establish whether or not you will be permitted to become a non-domiciled individual under UK regulations. These concerns along with many other questions you may have can be answered by a tax solicitor.

Do you have non-domiciled status, or are you looking to apply for the status? Contact Law works with a range of tax specialists, some particularly well-versed in immigration law, who can assist you with any issues you may have. Please call us on 0800 1777 162 or complete the web-form above.

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