I have been wrestling with the issue of the much trailed non-dom levy. On the one hand I am all in favour of people paying their fair share of tax, but on the other I am dismayed that it is being done in such a cack handed manner which is likely to damage the economy. Whilst I have little sympathy with US businessmen who are to be taxed on their worldwide income or pay £30k since a UK citizen working in the US would not even get the benefit of that option, I can see that the arbitrary change is a bit tough on people who have managed their affairs in the expectation that the tax system would remain stable.
However, rather than imposing the flat, reggressive £30k levy, there are a couple of sensible reforms that the Chancellor could make in a few weeks which would not be such an obvious cause celebre amongst the ex pat business community.
- Change the rules so that any income derived from employment based in or mainly undertaken in the UK is subject to UK taxation, regardless of where the payment for that employment is made. Currently, non-dom workers can be paid through off-shore companies for work done in the UK. This would be similar to the crackdown on consultancy companies, which were used as tax efficient vehicles.
- Levy a small percentage of the value of any real property held by an offshore company. Lots of properties (including the entire HMRC estate, via Mapeley STEPS) are held in offshore properties to be tax "efficient" and where properties are held in an SPV, this SPV can be sold avoiding the need to bring income into the UK or pay UK stamp duty as the only transaction is the sale of the SPV, in the BVI or whereever it is located.
There is no reason why foreigners working and living in the UK should be getting a free ride on the work done in the UK or property owned here. But the compromise (to keep a competitive advantage) is that we do not seek to tax money earnt and kept offshore.