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Tax take from non-doms jumps to record high

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The amount of tax collected from non-domiciled UK residents has jumped to its highest level since the charge was introduced, according to data obtained by Vestra Wealth.

The increase comes as the number of wealthy foreigners living in the UK returns to its pre-recession peak.


 
HM Revenue & Customs (HMRC) collected GBP178m from non-doms in the most recent tax year, a six per cent rise on the previous year when GBP168m was netted. The number of non-doms jumped from 116,000 last year to 123,000, the highest amount since 2008/09.


 
The non-dom levy (Remittance Basis Charge) was introduced in the 2008 Budget at GBP30,000 per annum and is set to rise to GBP50,000 in the 2012/13 tax year (returns due 31 January 2014).

According to Vestra, which manages the wealth of a large number of UK resident non-doms, the non-dom levy has not significantly dented London’s appeal to wealthy foreign investors.


 
Jenny Tozer, chair of Vestra Wealth's investment committee, says: “The levy has become very familiar for non-doms. It’s very transparent and business-friendly. Most clients see it as a ‘rent’ for the privilege of being in the UK but, given the other advantages of residence, a price generally worth paying.”


 
“The UK is still hugely attractive for inward investment. The question is whether the higher levy will make the UK less appealing.


 
“Relative to other jurisdictions, however, UK taxes on foreign residents are still fairly light. During the financial crisis France, Italy and Spain ramped up taxes on foreigners who own property, which has only increased the appeal of the UK.”


 
For many US expats resident in the UK, the Foreign Account Tax Compliance Act (FATCA), which obliges UK financial institutions to identify and disclose details of bank accounts for US citizens, is a greater issue than UK taxes.


 
Tozer says: “For many American expats the increasingly long arm of the US tax authorities is a greater concern than HMRC. The US Internal Revenue Service (IRS) has a reputation for being less flexible than HMRC.”


 
The Finance Act 2012 included provisions whereby non-doms can use untaxed overseas income or gains to invest in the UK. 


 
Tozer says: “Many non-doms are entrepreneurs. Allowing them to bring in money to fund businesses and create jobs is a very pro-business policy. This has undoubtedly persuaded many of the value of the UK as a base.”

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