Labor vows to end tax exemption for non-domiciles

The next Labor government would eliminate non-domicile status used by wealthy individuals to reduce their tax bills, the party said. The Independent.

The decision comes later The Independent revealed that Rishi Sunak’s wife, wealthy businesswoman Akshata Murty, used non-domicile status to minimize her UK tax bill and revealed alleged links between Sunak and offshore funds.

The chancellor, like most ministers, declined to comment on whether they benefited directly or indirectly from non-domicile status or the use of tax havens.

Labor shadow chancellor Rachel Reeves said: “As the Conservatives raise taxes on workers, it is simply not certain that those at the top can benefit from outdated non-home tax breaks.

“With Labour, the people who make the UK their home will contribute to this country by paying taxes on their global income.”

Rachel Reeves says the rich shouldn’t benefit from ‘non-domestic tax breaks’

(Getty)

Labour’s move to remove non-domicile status adds pressure on the government over the growing cost-of-living crisis and the Partygate scandal, which threatened to overshadow the prime minister’s trip to India last week ahead of elections. British locations in May.

Reeves said: “The Prime Minister and Chancellor have spent the last few weeks preoccupied with saving their own skins and have done nothing to address the spiraling cost of living.

“Worse still, they made it harder for workers to survive by raising national insurance.”

The opposition party also announced that it will now review the use of hidden funds abroad and in tax havens to avoid paying taxes in the UK, as part of a broader examination of the UK tax system that began in September last year.

The Labor Party decided it would discard non-domicile status because it failed a value-for-money test, as the party claims it likely costs more in lost revenue to the treasury than it generates. It would replace non-domestic tax status with a mechanism similar to those in Germany or Canada, which also allows temporary residents to avoid domestic taxes on foreign earnings.

“This would be a clear, simple, modern system, doing away with the 200-year-old rules we currently follow that mean domicile is passed down from people’s parents, without the need for the four complicated flowcharts HMRC uses to determine someone’s domicile. , ” said a spokesman for the Labor Party.

The government’s current policy is a “bizarre disincentive to investment in the UK,” Dan Neidle, tax attorney at Clifford Chance, said on Twitter. He believes that the elimination of special status would generate hundreds of millions of pounds in new tax revenue.

Four in 10 individuals who earned more than £5 million or more in 2018 claimed non-domestic status at some point, academics from the London School of Economics and Warwick University found in a recent study. It’s been a live political issue in recent years, with a 15-year conditional cap placed on the tax break introduced in 2017.

However, if a non-gift creates a trust abroad before their status expires, they can still benefit from the tax break through that trust once the 15-year threshold is reached. This is one reason why the Labor Party has also announced that it will review the use of offshore tax havens and trusts.

Mr. Sunak, as Chancellor, is responsible for setting the UK’s fiscal policy. He forwarded his financial disclosures for review by the independent adviser on ministerial interests, Lord Geidt. After a spokesperson initially defended his use of the non-household tax exemption, Murty announced that he would no longer use non-gift status on his tax return. However, she hasn’t given up on the ability to use it in areas like inheritance tax.

In a statement posted to Twitter earlier this month, Sunak said, “I’ve always followed the rules and hope this review provides more clarity.” A source close to the chancellor said they do not recognize allegations and documents seen by The Independent which showed that Sunak was listed as a beneficiary of offshore tax havens in 2020.

Some senior Treasury officials claimed they offered advice on decisions relevant to non-domicile status and tax havens, but were not told about the chancellor’s links to these issues. However, sources close to Sunak said senior Treasury figures were aware of the matter in order to manage potential conflicts of interest.

Former Chancellor and current Secretary of Health Sajid Javid released a statement confirming that he also used non-gift status after The Independent revealed the use of the tax incentive by Ms. Murty.

In response to the announcement of the new labor policy, an HM Treasury spokesperson said: “We want to attract talent to work and live in the UK, however it is only fair that those who choose to live here for a long time pay their fair share. of taxes. , which is why we reformed the rules in 2017 to end permanent no-gift status.

“Non-households play an important role in funding our public services through their tax contributions – worth over £6bn a year.”

The Labor Review of the Use of Trusts and Tax Havens will also examine how to extend beneficial ownership registries and tax reporting regimes “to provide transparency around offshore trusts”. It will also try to force the government to confirm the full extent of the offshore trust and how much it costs the state, limiting the scope of UK taxes, a spokesperson said.

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