Labour promises to replace non-dom status, the tax saving method

LONDON (Parliament Politics Magazine) – Following a scandal over the finances of Chancellor Rishi Sunak’s wife, Labour has vowed to replace the “non-dom” taxable status in the UK.

The party said it will end the “unfair” status that exempts UK residents with permanent residences abroad from paying UK tax on money earned abroad.

It would introduce a plan for temporary residents that would be shorter-term.

Rachel Reeves, the shadow chancellor, stated that outdated tax advantages would be phased out.

Non-doms play an essential role in paying for their public services, according to the UK government, with contributions to tax estimated to be worth £6 billion a year.

It was only right that those who had chosen to reside here for a long time pay their share of tax, a Treasury spokesperson said, which was why they amended the rules in 2017 to eliminate permanent non-dom status.

Non-doms can currently keep their status for up to 15 years.

At a time when the costs of living were rising and taxes were growing, Ms Reeves told the BBC that the status shouldn’t be given to a privileged few.

They needed to do more to close some of the loopholes that result in some of society’s wealthiest people not paying their fair share of taxes, she said. If you lived in the United Kingdom, you should pay your taxes here, she added.

Former Labour leaders Ed Miliband and Jeremy Corbyn had previously criticised the non-dom system and promised to abolish it.

The decision of recommitting to removing the status was made as part of a broader review of the party’s tax policies, which Ms Reeves announced at the Labour Party conference in the month of September.

However, it comes after Mr Sunak’s wife, Akshata Murty, claimed non-dom status through her father, Narayana Murty, the billionaire founder of Indian software giant Infosys, earlier this month.

According to the BBC, this would have saved her £2.1 million per year in UK tax on dividend payments from her firm shares.

Ms Murty announced that, she would pay UK tax on her offshore income following political reaction although remaining a non-dom,

If Labour wins the next general election, it has stated that it will replace the status with a shorter-term arrangement similar to those in Canada, Germany, and France.

For those who qualify, Ms Reeves said the status might continue as long as five years.  However, other nations do it for six months to five years, and they would advise [companies] on that, she continued.

Labour has not provided any additional information about its plan, but has stated that it will be a “clear, simple, and modern system.”

People who made the UK their home would contribute to the country by paying tax on their global income, Ms Reeves added.

Non-dom status is a vital aspect of the UK’s tax system, according to the Treasury, which wants to continue encouraging “talent to work and live in the UK.”

Eleni Kyriakou

Eleni is a journalist and analyst at Parliament Magazine focusing on European News and current affairs. She worked as Press and Communication Office – Greek Embassy in Lisbon and Quattro Books Publications, Canada. She is Multilingual with a good grip of cultures, eye in detail, communicative, effective. She holds Master in degree from York University.