Tax Research LLP has today published a new report in association with the Tax Justice Network in the UK. Entitled 'National Origin, Equality and the UK's Domicile Law as it relates to Taxation' this is a contribution to the protracted debate on the future of the UK's domicile laws.
Put simply, the report makes clear there is no basis for that debate. These laws discriminate between people living in the UK on the grounds of their national origin because that is the basis on which a person's domicile is determined. Since 2003 discrimination on this basis has been illegal under the Race Relations Act. It should however be stressed that 'national origin' is not the same as race, ethnicity or nationality. It is defined by the Commission for Racial Equality as:
'National origins' are not limited to 'nationality' in the legal sense of sense of citizenship of a nation state. The Scottish Court of Session has defined 'national origins' as '... identifiable elements, both historically and geographically, which at least at some point in time reveal the existence of a nation'.
This is the precise point about domicile. This term is not defined in UK law, but broadly speaking a person is domiciled in the country in which they have their permanent home. That is their place of national origin, irrespective of their race, ethnicity or nationality. It is the fact that both terms rely on this differentiation from race, ethnicity and nationality that makes clear they relate to the same concept - a person's natural home and community of association. Indeed, it is precisely these factors that the revenue looks for in determining domicile.
In so doing HM Revenue & Customs contravenes (even if unwittingly to date) the terms of the Race Relations Act 1976 and the Race Relations Act (Amendment) Regulations 2003. In law this constitutes unlawful indirect race discrimination which takes place in the UK if a public authority provides a service that affords a person of one national origin a social advantage over a person of another national origin unless there is a legitimate and proportionate objective that justifies that different treatment.
The provision of agreeing a person's tax liability to be lower than that which might otherwise be the case is the service that affords a person of national origin outside the UK with a social advantage over a person whose national origin is in the UK. We doubt very much that people will disagree with the idea that paying less tax is a social advantage and although discrimination against a majority might seem odd, it has a clear precedent. Women are, after all, in that position.
According to reports of the Revenues own estimates the tax saved is at least £1 billion and their own calculations suggest that this is an average reduction of at least 16% on the tax bills of those not domiciled. Many believe the estimate of the tax saved far too low: there is no reason for a non-domiciled person to report this data to the Revenue and as such any data they hold is bound to be an underestimate. The loss to the UK could, therefore, be much higher.
Awareness of this situation presents the government with three options:
1. It can seek to ignore its own law, and continue to discriminate as it is clearly doing at present;
2. Those of UK domicile must be provided with the same basis of taxation as those who are not domiciled in the UK, or
3. Those who are not domiciled must be given the same tax status as those who are domiciled in the UK.
The first option can at best be a short term solution, and hardly a desirable one at that. The second could not be afforded so the third option is the only one available.
The domicile laws must go.
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Richard
Do you think that this is the sort of situation that might lend itself to court action against HMRC or the UK State under the Race Relations or Human Rights Acts, EC treaties or perhaps judicial review?
If so, perhaps a barrister famous for actions upholding the rights (human and otherwise) of the oppressed individual against the state might be interested?
In the red corner, representing the underdog, dressed in black, fighting out of Matrix Chambers, Cherie Booth QC (cheques payable please to Mrs T Blair).
I believe that this paper could have a wider revevance, in that it could apply to high net worth indviduals residing in tax havens who have historically negatoiated the percentage of tax they pay, which could be zero, or have caps at 100 or 200 thousand pounds like Guernsey and the Isle of Man.
On average Jersey’s high net worth individuals only pay £71,000 per year in income tax.
Of course tax havens would need discrimination legislation. Jersey has none, although they are talking about discrimination codes, overseen by a quango
I am jiust sharing some point of view about non domicile situation ,why not mention that if you choose to work abroad and be non domicile you do not have any right with regard to tax relief ,tax allowances ,your expenditures abroad ,your pension when it comes to what you earn abroad when you are non domiciled .If non domicile law goes away be sure many will go with it somewhere else and with it capital earned by non domiciled brought here will surely fly somewhere else,England is a beautiful country but it is not because of its beauty many international businesses choose to establish themselves here.
Alex
I have a simple qeustion for you. Please prove what you say is true. There is no evidence to support your claim that I can find.
Richard
Dear Richard
When you move to UK you should fill in a form to confirm that you will not claim anything regarding your income abroad if you tick everything as demanded then you might be considered as non domicile and be taxed on remittence basis,i can look it up later and will refer to the exact form and number it has.there is also IR20 to read about,you could just call inland revenue and ask about what to do ,they will send you the form to be filled and you will see what i have mentioned is true.When it comes to taxing as someone mentioned the big fishes never pay appropriate tax as we ordinary people do,it does not matter whether it is Norway or Sweden or UK or USA.just search and see how much big corporation pay in tax in respective countries.
Uk has just lifted the doubble standard and accepted as it is with some adjustments.so the rules are clear at the same time UK absorbs a lot of capital and expertis due to non domicile situation.there are also double taxation aggreements and believe me for people like me it means that the country i earn my living will take all penny and nothing left for Gordon Brown.but if i leave for other countries and there are a few around so the situation resolves by itself .I am not against taxes but for justice but when i see what i will pay will go to war and mayhem i would rather spend it on my own family and charities i choos by myself.
[…] His definition of discrimination is too narrow. I have sent the EC the report prepared by Tax Research and the Tax Justice Network on why the discrimination inherent in this rule is much more profound than he seems to realise at present. […]
[…] It also proves my point about domicile and discrimination: the UK government knows this is discriminatory and is allowing it to continue all the same. Oh for the funds to pursue this one further. […]
[…] His reason for allowing these things to happen has been twofold. First, it is vital to the UK that the EU Code of Conduct is restricted to business taxation. If it were extended to personal taxation then the UK’s domicile rules would undoubtedly fall foul of that Code. These are a ring fence that provides a benefit to people whose national commitment is other than to the UK unavailable to those whose national origin is in the UK. This has continued despite, as has recently been suggested, such discrimination possibly being illegal under the UK’s Race Relations Act since 2003. Second, the domicile rules are of little use to the UK if there aren’t convenient nearby offshore locations in which the wealth of those persons who wish to utilise them can be recorded as being located whilst they live virtually tax free in London. As such for Brown’s policy to work the havens had to stay, and New Labour’s promise to reform their activities, made when they came into office have been quietly forgotten. […]
Surely the rules of residence will take priority over the rules of domicile ? The real anomaly is that the “non-domiciles” live and work in the UK, while pretending to do neither ? If they are not earning money over here, and do not live here ( have houses, jobs and families here ), then what is the argument about ? If they are earning and living here, let them pay tax like the rest of us. I believe the definitions of residence need to be looked at more closely, and taxation applied more strictly to residence, rather than to domicile.
Mickey
You’re right re the need to review residence as well.
But the point is that domicile can over-rule residence and leave a resident person not paying tax. And this can be for reason of their national origin. That’s not legal
Richard
…on the other hand, the Revenue is taxing loads of Brits living abroad, who have all their main assets abroad, as it’s virtually impossible for a British resident to shed his British domicile. So live abroad, work abroad, die abroad, and HMRC still grab 40% of your estate. Perhaps they believe there is more to lose down that avenue than by tightening the screws on non-domiciles stretching the UK residence laws !
Mickey
Good and fair point. I’d forego that claim based on domicile. True, I’d then deem a person resident for five years after they’d left for income tax for IHT purposes. But that’s fairer than the rule we have now.
Richard
…and while I’m feeling grumpy:
All the whingers who are knocking the so-called private equity fat cats’ tax “privileges” are forgetting that mostly to a man they themselves enjoy a massive privilege of their own: PPR CGT tax relief. Imagine the outcry if, in the name of “fairness”, that were to be called into question ! Let’s face it, it would solve the problems for all those who can’t get on the property ladder at a stroke, and introduce fairness between home owners and renters. So, what price “fairness” ?
Sure, I should be the last one to advocate such a change, but there really are a whole load of hypocrites around !
Sorry I seem to have gone off thread, but in a way it is topically related…
Mickey
Hypocrites? Here?
No way. We’ve been this way before. See http://www.taxresearch.org.uk/Blog/2007/06/07/well-said-that-man/
Richard
I’m glad I’m not alone; I don’t really want to see PPR exemption done away with, but I do wish people would stop pointing accusing fingers at other peoples’ tax breaks in the name of “social justice” ( as in the press nowadays ) while trousering handsome ones of their own, which if they did lose them, would cause them great gnashing of teeth !
And if the housing market dives, these same guys will be the ones clamouring for the government to drop interest rates and rescue them!
Enough ! I shall be quiet now ….
But I’m glad to have discovered this site, and will be a regular reader henceforth…
[…] As is the claim that the non-domiciled includes nurses. Well maybe, but I bet they’re the daughters of very wealthy people in that case. Because as I have calculated, with reasons, maybe 7 million people qualify to be non-dom in the UK at any time and I’ll bet that 99% of all foreign nurses here are in the 6.9 million who don’t claim the status on their tax returns. […]
[…] But underlying the comment is fear of being discriminated against, and quite right too. This legislation is discriminatory and it is illegal under the Race Relations Act as amended in 2003. The government just does not want to recognise that fact. So much for its principles. […]
[…] why can’t they resolve their differences, face reality, support ethical taxation, abide by UK race relations law and show faith with the ordinary people of the UK by treating them as being equal before the law, […]
[…] domicile rule as used in UK taxation discriminates between people on the basis of their place of national origin. Since 2003 this has been illegal in the UK on the […]
[…] say for certain that’s not true. The idea that there are about 7 million non-doms in the UK (which I first introduced) now seems pretty generally accepted in press comment. The ones talked about, and who might work in […]
[…] of course not. First of all, the domicile rule is illegal so it should be abolished. Second, it costs at least £4.3 billion, which is cash we need. Third, […]
i have just learned that there is no legal obligation to file a income tax return in America as it is not written into there constitution, is this correct and if so is it in the uk constitution or the EU constitution ?
thanks
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[…] doubt my commitment to ridding OECD countries of tax haven characteristics, I suggest you look at my commitment to ridding the UK of its domicile rule before being too loud in your condemnation. What is more, that campaign has delivered some (albeit […]
[…] The UK’s domicile rule infringes my human rights. I am resident in the UK but have no opportunity to pay tax on a remittance basis, whether I offer an inducement of £30,000 or not. I’m prejudiced on the basis of my national origin, and that’s illegal under the UK’s race relation laws. […]