I wrote the blog reproduced below in March 2007, but nothing of substance has changed on this issue since then. Except that the government has now announced a review of the domicile laws as they relate to taxation - promising token gesture changes in exchange for a guarantee that non-doms will then be left alone. Except, as this blog and the related report shows that should not be the case: the domicile laws are illegal discrimination on the grounds of national origin. The time when accidents of childbirth created difference in tax treatment should be history: it's to the shame of this government that it intends to perpetuate them.
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 theCommission 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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Judging from the fact that nobody connected with Tax Research or Tax Justice has made a complaint under the RRA, one can only assume that they believe there is little chance of success.
You have confused national origin with domicile. They are not always the same, as one may replace Domicile of Origin with Domicile of Choice. Hence British nationals may alter their domicile without necessarily amending their nationality.
Wrong
A complaint was made – I think the Treasury sat on it
And you’re also wrong re domicile – which is national origin
Of course national origin might change – but it has nothing at all to do with nationality
You show your lack of understanding
Why don’t you pop down to your local library and get your hands on A V Dicey’s Conflict of Laws.
As you are not a lawyer, I’d be interested what advise you sought for your original article from properly qualified legal counsel.
It was read by counsel and approved before publication
I’d also be interested in your source for the contention that domicile is national origin irrespective, apart from the fact that it exists at birth.
Why have you omitted domicile of choice and domicile of legal operation.
“broadly speaking a person is domiciled in the country in which they have their permanent home. That is their place of national origin”
If I permanently emigrate from the UK to the USA then I will have my permanent home in the USA. However, it would be far-fetched of me to then claim that the USA is my place of national origin. That’s what you are saying, is it not? Do you really think that’s correct?
“And you’re also wrong re domicile — which is national origin”
No it isn’t. If I am born in Australia to a UK domiciled father who acquired his UK domicile after emigrating from the USA, and I remain in Australia all my life (never once visiting the UK), then I think I would be hard pressed to describe the UK as my place of national origin.
I think you have it the wrong way round – it is easier to change one’s domicile (by permanently emigrating, for example), then it is to change one’s place of national origin. After all, the word “origin” means where someone or something started, does it not? If I permanently emigrate than my place of national origin stays the same, surely.
You are also making a massive mistake when you compare an individual’s “national origin” (singular) to the CRE defintion of “national origins” (pl). You are looking at two completely different things. The CRE defintion is looking at the beginnings of society as a whole, which has no relevance whatsoever for determining the “national origin” (singular) if an individual. This is a massive conflation of contexts. Read the CRE definition again and tell me how that has any bearing at all on determining an individual’s place of national origin. They are talking about two different things.
I don’t think you’re read the paper
A telling response.
CRE don’t talk theory
They talk practice for individuals
If national origin and domicile don’t coincide they have no meaning
And your examples are also in absurdum – as ever
Tax is in reality – and it never works perfectly in absurd cases of the sort you suggest. So what? – that’s the way it is.
OK, I’ve had a brief look at the paper. The first sentence states that discrimination occurs when a public body provides a service. This contradicts what you have stated many times here that the payment of tax is not payment for a service but payment to participate in society – something I happen to broadly agree with. When I use public services their provision to me and my family is in no way connected to the amount of tax I have paid up to that point. So unless public bodies are actually discriminating by say, allowing whites access to free healthcare but not blacks, then they are not discriminating because the amount of tax paid is irrelevant. HMRC’s duty is to collect the tax that is due under the law – that is their service.
The second paragraph of the first page then states that HMRC will supply domicile rulings. This is not correct because that service was withdrawn in March 2009. There is also a whole page in the body of the report about the process of such rulings.
Perhaps you could give us the name of the counsel who “approved” this, because I’d be amazed if one did.
You’ve ignored what I’ve defined the service to be – as usual you fall flat on your face – because the service is agreeing that a group need to pay less tax
And no I won’t share the name of the counsel – who did it pro bono
“because the service is agreeing that a group need to pay less tax”
Agreement does not come into it – as I said in my previous post, HMRC’s duty is to collect the tax due under the law. An inspector might think taxing someone at 50% is immoral but that is irrelevant – he must, by law, collect the tax that is due. It is Parliament that agrees what level of tax a group should pay.
Any comment to make about domicile rulings?
“I won’t share the name of the counsel — who did it pro bono”
I’m not surprised he or she did it pro bono.
Bet at least they exist: I have no clue you do
I certainly could not find you on the web
So what’s your credibility?
Speaking from limited knowledge/experience of expats retired to Spain.
Even though we are Spanish government registered UK citizens living as Spanish residents and paying ALL our taxes to the Spanish Exchequer and have no house, bank account or other tangible UK assets/connection it can be quite difficult to persuade HMRC that we are no longer “domiciled” in the UK and exempt, for example, from paying UK inheritance tax.
Even if the intention is to never return to the UK it appears difficult to lose “dom” status.
Or are we missing something here?
You do seem to have had a few problems. An individual taxpayer loses a domicile of origin in the United Kingdom only if you leave the United Kingdom, to live permanently in another gicven jurisdiction, with no intention to return to the UNited Kingdom. Permanent residence in another specific jurisdcition is part of the test, but not the only part. Perhaps that’s what pro bono apparently means…; Blame it all on the lawyers Getedit.
HMRC cannot have it both ways.
It is extremely difficult to shed one’s domicile of origin, which is extremely “sticky”. That’s why it is so difficult for UK expatriates to successfully claim that they have shed their UK domicile after they have left the UK. It’s precisely why foreigners are able to claim that they have retained their foreign domicile of origin after they have come to the UK.
Any system must surely either (a) catch the foreign nationals in the UK and release UK expatriates who have left the UK, or (b) vice versa. Politically (b) will produce by far the biggest benefit to the UK.
The new Equality Act 2010 does not appear to apply to legislative acts by Parliament. This is at least the conclusion of the Equality and Human Rights Commission. See:
http://www.equalityhumanrights.com/advice-and-guidance/your-rights/race/when-is-race-discrimination-lawful/exceptions-in-certain-public-authorities/
On a cursory look through the Act, it seems EHRC is right – legislative acts wouldn’t be covered because:
1) Although ‘service’ is undefined (at least, I can’t find it in Part 3), it is unlikely that ‘legislative activity’ would be a service in the ordinary meanging. If Parliament passes an act requiring me to put my dog on a leash, it can hardly be seen to be providing me with a ‘service’ in any sense.
2) Parts 4-7 wouldn’t seem to apply at all.
3) The only part that could apply is Part 11 regarding the public sector equality duty. It seems to apply only to public authorities in Schedule 19. Parliament is not mentioned as a public authority in that Schedule.
I realise your paper was from 2007 when earlier legislation applied. Section 19B of the Race Relations Act seems to make it clear that Parliament was not bound by it.
If Parliament wants to pass or keep a tax law discriminating on the grounds of national origin, it does not appear unlawful for it to do so at least under these Acts.
HMRC has no business choosing to refuse to administer a discriminatory law that has been lawfully passed. Of course, in its Part 11 duty, it would have do to so without discriminating on protected characteristics. For example, it presumably could not administer the law one way for an Argentinian, and a different way for a Sri Lankan whose circumstances were substantially the same.