Drilling down on latest non-doms statistics

The number of UK-resident non-doms decreased from 76,500 the previous year to 68,300. This was largely due to the decrease in number of such individuals coming to the UK in 2020/21 due to covid restrictions – 6,000 few new arrivals in 2020/21 compared to the previous year. These individuals accounted for £7.896 billion in income tax, national insurance (NIC) and capital gains tax (CGT) in 2020/21 – slightly up from the £7.878 billion in 2019/20.  Due to unusual circumstances surrounding the covid pandemic and the travel restrictions, it is not expected that this will be continuing trend.

Since the changes to the deemed-domiciled rules in 2017 there has been a fall in the number of those being able to call themselves a non-dom; there were 10,100 individuals claiming deemed UK-domicile status in 2020/21 – though this is believed to be an under-estimate, particularly from those who are UK domicile by origin. £3.414 billion in income tax, NIC and CGT were paid by these deemed UK-domiciled in 2020/21 (up from the £3.096 billion in 2019/20).

However, declaring oneself deemed-domicile ‘by origin’ comes which various disincentives which is likely to have caused some to withhold such declarations in their tax returns. These changes decree that anyone resident in the UK for 15 out of the last 20 years would be deemed UK domicile for tax purposes; also caught by the changes was anyone UK domiciled by origin (broadly those whose father was UK-domiciled) but had returned to the UK after one year, having adopted an overseas domicile prior to this.

The HMRC statistics show that the vast majority of non-doms remained in the UK for five years or less, with 3,000 fewer individuals staying for a second year than in recent years.

The remittance basis of paying UK tax is an option available to non-doms, meaning they only pay UK tax on income/profits remitted to the UK from overseas. In 2019/20, such individuals paid £6.352 billion in income tax, NIC and CGT. Those with unremitted income of more than £2,000 and have been resident in the UK for seven of the last nine years pay a remittance basis charge (‘RBC’) of £30,000 for the privileged of using the remittance basis; those in the UK 12 out of the last 14 years pay £60,000. There were 1,900 RBC-payers in 2018/19, increasing to 2,000 in 2019/20; those individuals paying £925 million to £987 million respectively in income tax for those years. The 2017 reforms had a notably-adverse effect on the number of non-doms paying through the remittance basis as well as paying the RBC.

The figures show that in 2019/20, 58 per cent of those claiming non-dom status resided in London; 72 per cent of the UK’s entire income tax, NIC and CGT receipts emanated from the capital in that year.

Remittance basis users can avoid paying UK tax on their remittances if the monies are invested in UK businesses – this is known as Business Investment Relief and has been in place since April 2012. Between then and 2020, £6.3 billion has been invested accordingly, with £853million invested in 2019/20 alone from 500 individuals.

The impact of the coronavirus restrictions played their part on the numbers of non-dom taxpayers - were it not for the restrictions then those leaving the UK would have been replaced by greater numbers arriving. However, the tax revenue in 2020/21 from non-doms did not fall as drastically from the previous year, despite a smaller tax base. Until the figures for the year to April 2022 are released, we are unlikely to see the full effect of the coronavirus travel restrictions on the movement and presence of non-doms and their contribution to the Treasury.

Blog by Christopher Thorpe, CIOT Technical Officer