The UK government is not tracking the full impact of the controversial reform of the non-domicile tax regime implemented under former chancellor George Osborne, a Freedom of Information request submitted by Quilter reveals.
Announced at the 2015 summer budget, the rule changes meant that, from April 2017, individuals were no longer permitted to claim non-dom status if they were born in the UK and had a UK domicile of origin or they lived in the UK for 15 of the last 20 tax years.
Some argued that restricting non-dom rules would push wealthy people to move abroad, potentially resulting in a net loss of tax revenues from the UK tax system.
Others believed it would force more individuals to pay tax on global income and gains.
Loss
At the 2015 summer budget, it was estimated the measures would raise an additional £400m ($519m, €444m) a year by 2020-21, although the policy impact was identified as being highly uncertain because of the potential behavioural impact.
Data published by the tax authority shows that the number of non-doms has declined substantially since the reforms were introduced.
In 2015-16 there were close to 120,000 individuals with non-dom status, falling by 33.9% to 78,000 by 2018-19.
Income tax paid by non-doms fell £1.2bn a year as a result.
However, an FOI submitted by Quilter found that HM Revenue and Customs (HMRC) has not identified what became of the more than 40,000 individuals who relinquished non-dom status.
The taxman stated that records are not inspected to determine whether the individuals remain in the UK tax system or have left the UK and no longer pay any tax in the country.
Non-dom Numbers and Income Tax Paid by Year – 2016-2019
| Financial Year | No. of Non-doms | Income Tax Paid |
|---|---|---|
| 2015-16 | 119,400 | £6.8bn |
| 2016-17 | 91,300 | £6.9bn |
| 2017-18 | 78,700 | £5.4bn |
Essential data
Quilter tax and financial planning expert Gordon Andrews said: “Non doms became a political hot potato, but since the reforms the issue has been largely forgotten. A ferocious debate played out around the 2015 election, as Ed Miliband and former shadow chancellor Ed Balls argued for curbs on the non-dom tax rules.
“But little has been done since then to investigate the true impact of the reforms implemented by George Osborne.
“We know that there are now around 40,000 fewer people claiming non-dom status, but the government isn’t collecting and analysing all the data required to properly evaluate the impact of its own policy.
“Without tracking former non-doms that remain in the UK as resident taxpayers, we cannot calculate how much tax those individuals are now paying. Similarly, we just don’t know how many people left the UK tax system altogether as a result of the reforms, and subsequently make no tax contribution to the UK whatsoever.
“Whatever your standpoint on the merits of non-dom tax status, it is essential to have robust data in order to make informed decision about the impact of any reforms.
“Policymakers should be in a position to make evidence-based judgements on the effects of tax reform, but the government isn’t collecting enough data on its own policies to enable that to happen.”
