The number of UK residents whose permanent domicile is not in Britain (non-doms) dropped 13% to a record low in the 2017/18 period, according to law firm Pinsent Masons.
In 2016/17, HM Revenue and Customs (HMRC) recorded 98,500 non-doms, compared to the 78,300 of the following year.
Additionally, the amount of tax revenue also fell by 21% to £7.5bn ($9.07bn, €8.09bn), from £9.5bn in the previous year.
UK exit from EU to blame
“Brexit uncertainty is driving out many of the wealthiest non-doms who are not prepared to hang around to find out the outcome,” said Josie Hills, senior tax manager at Pinsent Masons.
“The prospect of a Labour government is also very unappealing for high net worths – talk of monetary controls and wealth taxes are not well received. Given that there could be a general election in the near future, many will not be willing to take the risk that this becomes a reality.
“Non-doms make a huge contribution to HM Treasury’s coffers; this small group has contributed £45bn in tax over the last five years. The impacts of falling tax receipts from non-doms may only be felt once it’s too late.”
“The new ‘deemed domicile’ rules, which can draw non-doms fully into the UK tax net if simple conditions are met, may have also contributed to the drop in numbers. Non-doms are internationally mobile and if the UK is no longer an attractive place for them, then they can easily relocate.”
A matter of perspective
But HMRC does not see this as a loss at all, said accountancy practice Price Bailey, as it believes that many have given up their non-dom status to return to the UK.
Aaron Widdows, partner at Price Bailey, said: “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 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.”
