Could Non-Doms Undermine Labour's Dental Appointments Plan?
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- Published: Wednesday, 02 October 2024 11:10
- Written by Guy Tuggle
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It was a turbulent week at the Labour Party Conference. Having swept to power with a majority of 174 seats over all the other parties, Keir Starmer‘s first conference as Prime Minister could, indeed ‘should‘ have been a victory celebration.
Instead, it was overshadowed by self-inflicted wounds in the form of the ’winter fuel allowance for pensioners’ debacle and rows about Taylor Swift concert tickets, Arsenal seating arrangements and pretty frocks for Mrs Starmer paid for that kind chap Baron Waheed Alli.
And now, as delegates and MPs return to their rain soaked constituencies, another cloud is gathering. Proposals to further reform the tax regime for ’non-doms’ which Labour was relying on to fund, amongst other commitments, 700,000 additional dental appointments, might need to be watered down.
Non-doms are wealthy foreigners who live here but who, for tax purposes, are domiciled overseas and consequently pay lower taxes on their foreign income and wealth. Any income they earn in the UK, for example from employment in the UK, is already subject to UK taxation.
Labour’s proposed reforms to the tax system, however, would oblige qualifying non-doms to be tax-domiciled in the UK and therefore pay UK taxes on money earned elsewhere. "Those who live here should pay their taxes here" is an oft repeated mantra.
Changing the non-dom tax rules was predicted to generate £1bn, which Labour has earmarked to fund additional hospital and dental appointments plus school breakfast clubs.
But the proposal, easy and seductive to sell to a public hungry to see the rich ’pay their fair share’ has not enjoyed a smooth ride.
In a Damascene conversion, the former Conservative Chancellor Jeremy Hunt, long an opponent of taxing non-doms, preempted Labour and introduced some taxes on them in his last budget. He did so partly to raise funds to offset against the reduction in employees’ NI, and partly, and mischievously, to wrongfoot Rachel Reeves’.
The Hunt reforms, however, contained concessions that would incentivise non-doms not to pack their suitcases and flee the country. A case of ’better to keep them here paying something than have them flee and pay nothing’.
It is these concessions which are now understood to be back on the drawing board amidst concerns that up to two thirds of non-doms might decide to leave the UK if Labour follows through with its plans.
One model shows that ending the tax perks of non-doms, far from raising £1BN could end up costing £1BN in lost revenue. And that would be a major headache for a Chancellor eager to splash some cash on the country’s beleaguered public services.
A Treasury spokesperson told the BBC that any further changes to the regime should be shown to raise money, and that non-dom status in general will still be scrapped.
The Treasury spokesperson added: "We are committed to addressing unfairness in the tax system so we can raise the revenue to rebuild our public services.
"That is why we are removing the outdated non-dom tax regime and replacing it with a new internationally competitive residence-based regime focused on attracting the best talent and investment to the UK.”
Image Credit: Chris McAndrew, CC BY 3.0, via Wikimedia Commons.
Non Doms
DHSC have confirmed the additional resources from Treasury are confirmed irrespective of levels of non dom taxationYou need to be logged in to leave comments.
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