Importance of 'non-dom' taxpayers to UK economy risks being overlooked amidst 'tax evasion' rhetoric, says expert

Tax expert Jason Collins of Pinsent Masons said that the figures, which showed a 19% increase in the amount of income taxes paid by 'non-doms' over the last three years for which figures are available, showed the "very significant" contribution that this group of taxpayers made to the UK Exchequer.

"Non-doms are often portrayed as a group of plutocrats who add little to the UK economy and exploit loopholes to pay no tax," he said. "In fact, the amount they have paid in income tax is up 19% in the last three years alone."

"They have huge spending power, invest in UK businesses and create thousands of jobs in the UK. They can't do this if they aren't here so the Treasury needs to be careful that it doesn't kill the golden goose by overtaxing it. There are plenty of other countries competing to welcome these non-doms to their shores. This data on tax revenues shows that non-doms are more important to the UK economy than ever before, with the income tax they pay helping to subsidise public services," he said.

According to the figures, the amount of income tax paid by non-domiciled taxpayers rose to £6.8 billion in 2011/12, up from £5.7bn in 2008/09. Of this, only 2.6% or £178 million consisted of the annual levy on non-doms that have been in the UK for seven years or longer and who choose to pay taxes on the remittance basis, meaning that income and capital gains that are based outside of the UK and not brought into the country are not subject to UK tax. They then only pay tax on income that they generate in the UK.

Collins said that although the instability caused by the Arab Spring resulted in an increase in non-domiciled taxpayers choosing to live in the UK, continuing to add to their tax burden could "drive them away". He noted that the annual levy had recently been increased from £30,000 to £50,000 once a non-dom had been in the UK for more than 10 years, while the UK government had also recently increased the annual tax on enveloped dwellings (ATED) levied on residential properties owned through a company.

"Following the credit crunch and the collapse in government revenues non-doms were seen as a handy scapegoat," he said. "Actually they have been major contributors to the public purse all the way through the recession."

ATED was introduced in April 2013, and was originally payable in respect of residential property valued over £2 million held by a company or other non-natural person. At the 2014 Budget, the government announced that the threshold for the charge would be reduced from £2m to £500,000 in stages. From 2015, the government will also extend the scope of capital gains tax (CGT) to cover gains made on the disposal of UK residential property by non-residents.