Labor has pledged to replace the so-called ‘non-dom’ taxpayer status in the UK following a dispute over Chancellor Rishi Sunak’s wife’s finances.
The party said the status was unfair. It allows UK residents who are permanently resident abroad not to pay UK tax on income earned abroad.
Instead it would introduce a more short-term scheme for those staying in the UK for up to five years.
Shadow Chancellor Rachel Reeves said it would end “outdated tax breaks”.
Currently, Non-Doms can retain status for up to 15 years.
Labor has previously been critical of the Non-Dom Arrangement and had promised to abolish it under former leaders Jeremy Corbyn and Ed Miliband.
The party said its decision to recommit to removing status was part of a broader review of its tax policy that Ms Reeves announced at the Labor Party conference in September.
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But a row also ensues earlier this month after it was revealed that Mr Sunak’s wife, Akshata Murty, had claimed non-dom status through her father, Narayana Murty – the billionaire founder of Indian software giant Infosys.
The BBC estimated that this would have saved it £2.1m a year in UK tax on dividend payments from its shares in the company.
After a political backlash, Ms Murty announced that although she would remain a non-Dom, she would pay UK taxes on her overseas income.
Labor has said if it comes to power after the next general election it would replace the status with a shorter arrangement, similar to that in France, Germany and Canada – expected to last up to five years.
It has not given any further details of its plan but said it is a “clear, simple and modern system” and it will consult on terms after taking power.
Ms Reeves added: “With the Tories levying taxes on working people, it’s just not right that those at the top can benefit from antiquated Non-Dom tax breaks.
“With Labour, people who make Britain their home will contribute to this country by paying taxes on their global income.”
A Non-Dom is a UK resident who declares permanent residence or domicile outside the UK.
A residence is usually the country that his or her father considered his or her permanent home at birth, or it may be the place abroad to which someone has moved with no intention of returning.
To prove to the tax authorities, non-doms must provide evidence of their origins, lifestyle and future intentions – such as where they own property or want to be buried.
Those who have status must continue to pay UK tax on UK income but are not required to pay UK tax on foreign income.
You can give up your Non-Dom status at any time.
According to the latest figures from HM Revenue and Customs, 75,700 people claimed Non-Dom status in the UK in the 2020 tax year.
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