According to a study, one in five bankers uses the Non-Dom tax-saving status

One in five bankers is taking advantage of special status to lower UK taxes on foreign income, a first-of-its-kind study has found.

By not being tax resident, individuals can avoid paying UK tax on monies generated from foreign investments or rentals on foreign property. It also means that only UK assets are subject to inheritance tax. Those who use it will still have to pay tax on UK income.

The report comes through after a separate investigation The Independent revealed the Chancellor’s wife, Akshata Murthy, is using Non-Dom tax status to reduce her tax bill on foreign income in the UK.

Whether or not to use non-dom status to minimize UK tax is optional. as per HMRC guidelines. The study found that very wealthy people are “much more likely” to use status than those with lower incomes.

Non-dom status is not available to ordinary taxpayers. It allows those using it to live in the UK full-time and for several years before it expires.

There are no official statistics on the cost or benefit to the UK public purse of the policy of granting status to some people, but around 70,000 people claimed status in 2018.

Four in 10 people who earned £5million or more in 2018 have at some point claimed non-dom status, researchers from the London School of Economics and Warwick University have found after being given access to anonymised HMRC data for a decade .

Andy Summers, associate professor at the LSE, said: “The non-dom regime is primarily used by the very wealthy, who receive tax breaks unavailable to ordinary taxpayers. This giveaway could cost the Treasury significant revenue and deserves closer scrutiny at a time when everyone else is facing tax hikes.”

Changes introduced in 2017 restricted Non-Dom benefit to those born in the UK or living there for 15 years. The place of residence of a person’s father at the time of birth usually determines whether or not a person is entitled to this status.

One in ten residents in some of London’s most expensive areas, Westminster and Kensington, used non-dom status sometime between 1997 and 2018.

The study found that there is a wide spread of geographic ties for non-doms. About one in seven are from India and a similar amount from the US, while the remainder are mostly from Western Europe or English-speaking countries like Australia. The fastest growth in taking advantage of the special tax status is among people from China or former Soviet countries.

The research also found clusters of non-doms in areas such as London’s South Kensington, near the French consulate, and Aberdeen South, near oil industry hubs. Sports players also appear to be capitalizing on status around Manchester.

Arun Advani, assistant professor at the University of Warwick, said: “While most people are obviously ignorant of the non-dom regime, I think the biggest shock for bankers and others working in city jobs might be when they realize how many of their peers benefit from a tax system to which they do not have access.”

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