The BBC invited me on two occasions, to join Nicky Campbell on his Sunday morning show to contribute to the debate on how valuable rich people are to the UK.
The first time, as we went live – Nicky turned on me, aggressively. Is it right for some people to live in this country and not pay their fair share of tax? I cannot remember what I said, I was so surprised, but remember being quite robust. If the government tax this valuable community too much they will simply leave!
One woman, a strongly opinionated journalist, claimed they would not – we now have the statistics, who is right?
The simple answer is that one quarter have either left or given up their privileged status, but the total tax taken has gone up. Sadly, records only began in 2008, when a fee was introduced for the privilege of the beneficial tax regime for non-UK doms living in the UK.
In 1986, I was asked by the Weekend FT to write a column on tax and trusts, which I did for twelve years writing about ten articles a year. At that time, very little was written about the taxation of non-UK domiciled persons, so I had no option but to read the legislation and interpret it as best I could.
I was shocked to discover, as I wrote my articles, that non-domiciled persons could save vast swathes of tax simply by leaving most of their assets offshore, preferably in trust, and to bring into this country only monies on which they needed to live. And even this tax could, with careful planning, be avoided.
Although, I cannot claim to be responsible for the surge in the offshore fiduciary industry and an influx of wealthy people into the UK, in the 80s and 90s, I certainly think I contributed to it.
As the years rolled by, it became increasingly clear to me that the Treasury would clamp down on this ‘gravy train’ of tax breaks for the non-doms, which is precisely what it did, although for many, it was great while it lasted.
In 2008, the Government introduced a charge of £30,000 for any non-domiciled person who had been resident in the UK for 7 of the previous 9 years and did not want to pay tax on their unremitted offshore income and gains. In 2012, a new band was introduced £50,000 for any such a person who had been resident in the UK for 12 of the previous 14 years (which went up to £60,000 from April 2015). Then, in 2015, a new band was introduced of £90,000 for such a person who had lived in the UK for 17 of the previous 20 years.
Finally, from 6 April 2017, the £90,000 band was dropped and all non-UK domiciles who have lived in the UK for 15 of the previous 20 years will now have to pay UK income tax and capital gains tax on their offshore as well as their onshore wealth.
We do not know what the outcome of this deemed domiciled rule will be, because the published statistics only go up to 15-16, but we can see, from the statistics published this month the effect of the increase in the remittance charge on the behaviour of the non dom community living in the UK.
First, the total number of non-doms who do not want to pay the fee for the privilege of having their unremitted offshore wealth left untaxed, fell by one quarter, down from 120,000 to 91,000. This could either be because they did not want to continue to pay the fee for the privilege, or they have simply left the UK. The split would appear to be 50:50.
Second the tax take went up. Non doms last year paid more income tax, capital gains tax and national insurance tax than at any time since records began - 2008.
Of the non dom taxpayers only two thirds bring monies into the UK which is taxable, the others may simply leave their monies offshore, because they do not need it in the UK. The amount of tax paid on the remittances was £2,100 million, which is roughly the same as previous years, but the fee for the privilege was up to £285 million which is the highest amount ever paid, largely due to the £90,000 band.
The number of people who pay this fee is only 4,300. This means that of the 91,000 who claim non-dom tax privileges, less than 5% stay beyond seven years, or then drop their non-dom status.
As from April 2017 of these 4,300 who have been here for fifteen of the previous twenty years, they will be taxed on their worldwide income and capital gains. Ironically, provided they do not need the money to spend personally, it can usually be, legally, mitigated or avoided.
Changes were also made as from April 2017 to the rules of non-doms for inheritance tax. If they have lived in the UK for fifteen, rather than seventeen out of the previous twenty years, they will be subject to inheritance tax on their world-wide wealth at 40%. However, this can also be avoided, provided action is taken before the fifteen-year cut-off date. Simply set up a trust and transfer all your non UK assets into it. And if you want to know how to do this without losing control of your world-wide wealth, simply contact me.
If you would like to find out more or buy Caroline’s book ‘When you are Super Rich Who can you Trust?’, please contact Caroline on 020 3740 7422, or email on caroline@garnhamfos.com