The Government has ignored the potential cost to the UK economy of introducing its proposed £30,000 annual levy for UK-resident non-domiciles, according to business and financial advice firm Grant Thornton.
The levy, which will apply to anyone who wants to continue to be taxed on the remittance basis for their foreign-sourced income and gains, and who has been resident but not domiciled in the UK for seven years, comes into force on 6 April 2008. About 20,000 people are estimated to be affected, and the Government has said as many as 3,000 may leave the UK as a result. With non-doms contributing £12bn a year to the UK economy, and £4bn in tax revenues, a reduction of 15% in non-dom numbers could have a significant impact. The tax take from the levy could fall from a projected £350m in 2009/10 to £200m in 2010/11 as a result of people leaving.
Chris Mills, director at Grant Thornton, commented: “There is a strong margin for error in the Government estimates, which have already been revised downwards since the pre-Budget report announcement. As the Government does not have accurate data concerning the scale of unremitted income, how can the Government possibly predict the number that will become non-resident? Such a fundamental question must be the starting point in taking these proposals forward.”
In addition, as the £30,000 levy will be paid out of remitted income, it effectively rises to £50,000 once the tax paid on that remitted income is taken into account. As it is a levy and not a tax, it will also not be available to offset against foreign tax liabilities.
Grant Thornton splits those likely to be affected into four groups: employees, whose employers may pick up the tab, which raises the cost of doing business in the UK; the super-rich, who can afford the levy but may feel disgruntled by it; those with the flexibility to leave immediately, who may well do so; and the rest who will remain in the UK and pay the levy.
'We have better oversight'
50th anniversary of moon landing
Technical and behavioural factors
The Value Perspective