Where are all the non doms?

Where are all the non doms? My guess is, on the way to the harbour.

You see the Labour party, who everybody is saying is a shoe-in for the next election are threatening to take a look at non doms. And by take a look, they mean get rid of them altogether.

Worse, still, there’s a rumour out there that the Conservatives are looking into stealing this idea from right under Labour’s nose. (Update 08 March 2024 – The Conservatives did steal this flagship policy from right under Labour’s nose).

Now, whilst everybody knows you shouldn’t trust what politicians say, people are starting to worry there may be something to all this.

By people I’m talking about all the non doms out there.

Non what?

Just in case you are wondering, non dom means non domicile which in turn describes a simple state of affairs whereupon your domicile isn’t where you live.

It couldn’t be simpler could it?

As long as you understand domicile that is. And well, I have to admit that’s a tricky one.

But for what it’s worth, here’s my take on it.

Domicile is a tool often used for tax planning purposes by the incredibly wealthy

Of course, other people would argue, it is something to do with where you feel like you really live when compared to where you actually live.

I know what you are thinking. That’s not clear. Would it be possible to explain it in simple terms.

Sure.

Like say, you live in the UK but your fourth uncle twice removed came from Berlin. In that case, you might kind of feel like you are German, meaning that Germany is you real home rather than Britain and if that’s the case then you just might be able to make a claim that you could be something along the lines of a non dom. And if that was to occur, it would be kind of super because non doms have benefits, particularly in the domain of taxation.

Did you follow all that? 


Keep it simple stupid

OK, I’m probably making it sound a bit more complicated than it needs to be.

Most people know what their domicile is really. My guess is most people reading this, even if you don’t live in the UK, will have UK domiciles.

Where you were born usually sways it.

If you are an American living in Britain, your domicile is usually going to be the US for example.

But, if you had some valid reason you could claim a different domicile to where you were born.

Perhaps, you lived in another country for a long time or your father is from overseas.

Tax mitigation 101

And if if you were a non dom you wouldn’t have to pay tax on your overseas income. (Update 8 March 2024 – These benefits can now only be enjoyed for 4 years. Whereas previously it was 15).

Typically this might be your investment portfolio or overseas property or perhaps a business.

Great if you have a lot of overseas income don’t you think?

Now, I guess somewhat understandably, people often blow their tops when they first hear that, but it’s not really that bad when you stop and think about it.

These non dom types still have to pay tax on any income that comes from the UK.

Not only that, but Brits often get the same treatment when they move abroad. Other countries might not call them non doms but whatever word they use will mean the same thing.

At the end of the day, if governments started taxing foreigners income the minute they hit their shores tourism would fall off a cliff.

Low tax regime

And anyway, many popular UK expat destinations have low tax regimes.

For most people, I think the controversial thing with domicile isn’t really that foreigners aren’t taxed on their overseas incomes when they stay in the UK, it’s that people who in all other circumstances would be described as British, find ways to say they aren’t so that they can earn overseas income tax free too.

I think that’s the bit that tends to rub people up the wrong way.

But hey, if there’s a loop hole and you can legally exploit it to save a big tax bill you’d have to be certain kind of individual not to want to take advantage of that.

Some people have really high tax bills after all!

High tax bills

Take Prime Minister, Rishi Sunak for example. He had a £500K tax bill last year. If he was a non dom he might have avoided that.

Incidentally, Rishi’s wife does claim non dom status. But that’s totally understandable. She’s worth around a billion. Imagine how big her tax bill would be if she didn’t!

To be fair, she really is a foreigner living in the UK ie one of the real non doms. It’s just the fact she’s married to the Prime Minister that makes her a prime target for the anti non dom brigade ie the Labour Party (Update 08 March 2024 – and her husband’s Conservatives)!

Whilst I don’t want this article to get into the political realm, it hasn’t escaped my notice that Labour are also talking about picking on non UK residents too (& being one of them, that does actually matter – this isn’t political though).

Apparently the housing shortage is our fault.

But as only 1% of housing are owned by non UK residents and as many of them are just people who are temporarily working overseas, I have serious doubts about that one.

Not me guv

In any case, whether its our fault or not is irrelevant. If Labour’s promises come to fruition it could be a lot more difficult for us non resident individuals to buy properties in the future and if we can manage it, we’ll probably be paying even more stamp duty than we do now. Ouch!

I do think people confuse real non residents with those deemed non resident for tax planning purposes, though!

You know most non residents are just Brits who moved abroad for work or something.

Yes, UK non residents don’t have to pay tax to HMRC on pretty much everything except property.

But, only if they stay abroad for five years and anyway its no big deal, because we don’t live in the UK anymore and have to pay tax where we live now.

Most people shouldn’t have a problem with that.

On the other side of the coin, there is a group in the UK non resident population that I can understand people might feel less sympathetic to.

I’m talking about people who live in the UK claiming non residence.

You know the ones. They spend half a year in the UK, a couple of months abroad and then the rest of the time in their tax planning vehicles.

Tax planning vehicles

Have you ever stopped to think about why rich folk ride about in yachts?

I have to admit, I used to be a sucker too.

I thought yachts were for showing off and holding parties, but having looked into it, I now realise that’s way off the mark.

Yachts are quite simply tax planning tools used to assist with non residency claims.

Think about it. You’ve got to be onshore to be resident.

Every day you are on a boat is another day you aren’t in Britain.

Did you know?

You can spend up to 6 months in the UK and still be classed as non resident.

And once you understand that, it’s a bit easier to understand why tax planners like boating!

Just in case you are wondering, yacht tax planning tools don’t have to come with multimillion dollar price tags either.

It is said, something liveable and sea worthy can be snapped up for less than £60K. And considerably cheaper options available for DIY enthusiasts.

Just a thought!