Last updated: 15 August 2019
As the world becomes an increasingly global place, with the number of people taking up residency beyond national borders continuing to rise, the news from a HMRC report that the number of individuals claiming non-domiciled status in the UK has fallen from 90,500 in 2016/17 to 78,300 in 2017/18 may come as a shock to many.
While, the media may report of non-doms fleeing the UK due to Brexit or the possibility of a change of government, HMRC, in their statistical commentary on non-domiciled UK taxpayers, actually presented two reasons for the drop:
- Those who have switched to UK deemed domicile status due to changes in UK Government legislation from April 2017
- People who previously paid comparatively little UK tax actually leaving the UK.
The result, according to HMRC, is the total tax take has not actually fallen.
What were the April 2017 deemed domicile changes?
The deemed domicile rule change, which came into effect in April 2017, meant that previously non-UK domiciled individuals were treated as UK domiciled (or “deemed domiciled”) for all tax purposes, if they were UK resident for 15 out of the last 20 tax years, or if they were both born in the UK with a UK domicile of origin.
It meant that these people could not claim the remittance basis, meaning that all their worldwide income and gains would be subject to UK tax rather than just the amount brought into the UK. Therefore, the reality is that some of the reduction in ‘non-doms’ was down to a change of classification.
Tax revenue from non- UK doms
While, all non-UK doms paid around £9,489m in tax in 2016/17, HMRC put the figure for the remaining non-UK doms at £7,539m in 2017/18. However, when taking the reclassified individuals into account during 2017/18, the amount of tax stayed roughly the same, mitigating those who left completely.
Are you approaching your 15th year?
However, if you are a non-dom, who is soon approaching your 15th year in the UK and are therefore thinking of leaving as a result of this, seek professional advice as becoming deemed UK domicile, does not necessarily have to lead to a huge rise in your overall tax burden. With careful planning and the judicious use of Double Taxation Agreements, those coming up to their 15th year in the UK may be able to minimise potential liabilities on their overseas income or gains.
Still thinking about leaving?
Having said that, if you have fears over the impact of Brexit and the prospect of a General Election, and for this reason may still be considering a move out of the UK, get in touch with a professional tax adviser as soon as possible. An adviser will be able to help you review your situation and, if necessary, plan your departure taking into account any necessary tax liabilities to avoid unwanted surprises about your residence position.