The issue of domicile he re-surfaced in the comments on this blog.
I wrote the blog reproduced below in March 2007, but nothing of real substance with regard to the rule has really changed on this issue since then, even if a charge for using the rule has been introduced in some situations. 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.
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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It’s not illegal discrimination on the grounds of national origin. As I’ve shown in my comment on your other blog entry. Why do you peddle things which you know to be false? As someone who speaks to the media you have a duty to at least try to get things correct.
I believe them to be true
You have asserted otherwise
I have presented a case
I didn’t merely assert – I gave you an example each way of how it doesn’t operate on the basis of national origin. You then did not respond in substance to what I said about it not being discrimination – instead you just told me it was a loophole (which by definition it is not). It’s not sufficient to say you believe it is discrimination. That’s not how the law works. You say this: “in which they have their permanent home. That is their place of national origin, irrespective of their race, ethnicity or nationality.” But my comment on your other blog entry shows why that is incorrect, because domicile does not operate on the basis of national origin alone.
I’d have no issue if you questioned whether the res non dom rules are a good thing. If your quibble was that we are anomalous globally in having these rules and that the economic case for the rules isn’t fully made out. But to say they are a loophole or constitute illegal discrimination? That’s just not right.
Domicile is national origin
I suggest you stop talking nonsense
Domicile is not national origin, again, why don’t you engage with criticism instead of reasserting your statement? Is it because you know you might be wrong?
OK then
What is domicile?
Tell me
I know I am right
Some examples for you, where domicile and national origin depart, taken from HMRC’s Manuals:
http://www.hmrc.gov.uk/manuals/rdrmmanual/RDRM24050.htm
http://www.hmrc.gov.uk/manuals/rdrmmanual/RDRM24030.htm
http://www.hmrc.gov.uk/manuals/rdrmmanual/RDRM24160.htm
http://www.hmrc.gov.uk/manuals/rdrmmanual/RDRM24190.htm
Permanent home does not = national orgiin. Domicile does not = national origin.
Home does not = national origin
But domicile does = national origin
What else it is?
You do not understand domicile
No Richard – you don’t understand. From the HMRC Manual:
“For the purposes of the laws of the UK, domicile means something different from and is separate from other connecting factors such as nationality or residence. So, it is possible to be a national of the UK, presently resident in Spain but domiciled in Jersey.”
Domicile does not equal national origin.
Domicile is based on one of three things: (1) origin, (2) dependence or (3) choice.
A domicile of choice is acquired by the combination of:
-physical presence in a legal territory as an actual inhabitant, and
-the intention to remain in that territory permanently or indefinitely.
That is nothing to do with national origin.
So domicile does not = national origin.
So you are wrong.
Respectfully, because you think national origin is a physical fact you clearly are clueless
National origin is not a physical fact
And that is why domicile is national origin
And notional origin – the place to which you have allegiance is changed – by choice – which is precisely why it is not residence or nationality
Now please don’t waste my time again
Show me legal authority that national origin means what you say it does (i.e. that it is your “allegiance”). Just show me.
You can’t, because you’re wrong. You cover it up by being rude to me. No doubt you will now cover it up by censoring my polite and reasoned comments.
I have quoted my authorities
Your own quoted authorities wholly support my view and argument – as does all you refer to on the HMRC web site
I have quoted case law
I have 30+ years experience in the area
I am closing this debate – because the wilfully closed minded are not worth debating with
So your answer to my question: “As someone who speaks to the media you have a duty to at least try to get things correct.” Is that you don’t care whether it’s correct, as demonstrated by the fact that you won’t engage in debate and delete posts that you have no answer to.
If you have any “Courage” you will post this and cite your legal authority, the cases you mention below, and explain why the HL authority I’ve cited is not in point. I won’t be holding my breath.
I have to my own satisfaction more than answered the point
You clearly do not understand the meaning of domicile or national origin – seeming to think it place of birth
We differ
I have cited my own authorities in the blogs and text – you have even cited them for me from HMRC which is kind of you
I think I have correctly interpreted them
You don’t
That’s what happens in debate like this
I really do not think I can spend the rest of my life reiterating the points I have already made
This debate is closed
You have no integrity, do you? Whatever gets you quoted in the media. Shameful. I think i trust the law lords on the meaning of national origin more than a provincial ex-accountant!
Ah – you reveal yourself in your true colours as a true Worstallite
I am actually a current accountant
Re the media – see a report later today
And as for integrity – I have offered my honest opinion
It differs from yours
And that apparently is my crime
How come other countries manage quite well without?
They’re not tax havens, unlike the UK
“Domicile is national origin”
Sounds a little odd. I can change my domicile but I can’t change my national origin. The second is determined as being the nation from which I originated isn’t it?
National origin is not fact as you imply
Domicile is a state of mind
So you can be domiciled in a place you have never been but to which you wish to go e.g. the child of a political excile can be domciled in the place their parent was born even if they have never been there
That’s what national origin as distinct from nationality and residence means
But some here are choosing not to understand that
Or why it is capable of abuse for tax and why tax discrimination on the basis of it is illegal, in my view
National origin is where you are born (dictionary definition). There is no definition in the statute of national origin, as far as I can find, so we look to case law.
London Borough of Ealing v Race Relations Board: majority HL ruling that “national origins” means:
“a person’s connection by birth with a particular group of people who could be described as a ‘nation’ and did not mean the same thing as ‘nationality’ in the sense of citizenship of a particular state;”
That’s what national origin as distinct from nationality and residence means. So Tim is right – you cannot change your national origin.
Unless you have an alternative authority for your position?
National origin is not where you are born
I have quoted law on this
And yes you can change national origin – in the sense that it is your natural home – and that can, albeit not lightly, change, as a matter of fact
Again, you are simply wrong
“So you can be domiciled in a place you have never been but to which you wish to go e.g. the child of a political excile can be domciled in the place their parent was born even if they have never been there.”
Yes, I understand that entirely. As in your speculation recently about whether Dennis Thatcher was of NZ domicile and thus so was Margaret Hilda.
Which is why I think that domicile and national origin are not the same thing at all. For Dennis Thatcher’s national origin was definitely the UK.
Further, he could not change that national origin: but he could most certainly change that NZ domicile to UK if he had so wished.
And if all of that is true then domicile is something different from national origin: and thus domicile cannot be an illegal discrimination on the grounds of national origin.
National origin is not physical
You entirely miss the point
HMRC make that clear
I quote cases on the issue
Why do you wish to ignore it?
Please quote the cases, Richard, as I have done, and tell us how they overruled the HL authority of Ealing v Race Relations Board. I searched for authority in your document and found none.
I’ve already made my position clear
The domicile rule is indeed odd, and there is a real debate to be had whether it is still useful. However this post misunderstands the legal position. The domicile rule is a statutory provision – as such it cannot breach the Race Discrimination Act or the Equalities Act, as neither Act purports to bind Parliament itself.
But it should
And what about the Human Rights Act?
The HRA and some European legislation purports to override future Acts of Parliament. That is unusual (and controversial). The RDA, EA and most other legislation does not. It is therefore simply not possible for tax legislation to be contrary to the RDA or EA, and the premise of your post is incorrect.
On reflection it would be rather a bad thing if tax legislation was subject to arguments that it breached the RDA and EA. The Big Four have made enough money getting UK tax legislation overturned on the grounds it contradicts EU law (costing the Exchequer many billions). Giving them another game to play seems gratuitous…
Thank you
You have submitted an argument I will have to consider
I really do not understand all this but the law should be changed to make it clearer.
My son’s partner is Danish. They are not married.
They have two children, a boy born in 2002 and a girl in 2007.
The boy has to have a Danish passport until he is 18, when he can choose to become British or remain Danish. If things stay the same, he could have to do National Service in Denmark, and could end up being sent to fight in Iraq or Afghanistan or whichever other foreign war Europe is engaged in.He was born in York.
The girl had to have a Danish passport for her first trip to Denmark, but when she gets a new one, she can have a British one. She was born in Norfolk.
Not quite sure where this fits in, but they both go to English schools, and can understand bits of Danish, but it’s certainly not their mother tongue, and they would have to learn it as a foreign language if they ever went to live in Denmark.
This country certainly needs to clarify its rules on domicile and nationality before my grandson reaches 18.
And whoever lives in this country and makes money in this country, either earned or unearned, should pay tax on it in this country. It really is that simple. Time the government saw that.
Jen, that’s what the law says already. A non-dom is taxed on all the money they make in this country. Their earnings overseas are not taxed though. I think that what you are actually advocating is for worldwide taxation of every resident?
I thought one of the main problems with tax was that non-doms made lots of money here, then sent it to tax-havens abroad to avoid paying tax on it. They only pretend they earn it overseas. And that they find lots of loopholes in the law that says they should pay tax on their income like the rest of us.
You need to think that through a bit more closely.
Let’s start with a non-dom. Say she’s UK resident for tax but domiciled in, say, Ireland. She might have that domicile because she’s Irish and plans to return home eventually, perhaps her Dad was Irish or maybe she’s married to an Irish citizen (domicile is a wooly concept, which is a large part of the problem with it).
As a result of her non-dom status any income that she earns and keeps abroad is not subject to UK tax. The keeps part is important because if she brings the income onshore then it becomes taxable.
Now imagine that she works part-time in the UK. So she has earned income from the job. Let’s say she runs a small business too and has some profit from that. Both of those are taxable in the UK. No question. But if she saves her post-tax income in an offshore bank account (quite likely in the Isle of Man) then she doesn’t pay any tax on the interest unless she brings the income onshore (She’ll probably actually have two bank accounts, one that she puts her capital into and one that the interest is credited to. That way if she needs some of the money in the UK she can bring back capital – tax free – rather than income, which would be taxed). I’ve over-simplified, but that’s basically how it works.
Now, you mentioned loopholes. What she needs is a loophole that keeps the income or profit out of UK tax. She can then legitimately move the un-taxed income offshore and into non-dom protection. So that’s actually a defect with the rule where the loophole is rather than the non-dom rules. (I’m assuming though by loophole you mean legal avoidance rather than illegal evasion, because if it’s the latter than you’ve got a criminal act and so the problem is not a loophole). So you first need to fix the legislation with the loophole regardless of what you do with the non-dom rules.
If it were up to me, I’d probably abolish the non-dom regime. It’s a hangover from the days of empire. I’d probably bring in taxation if worldwide income (as the US does). Some people have dual-citizenship (me for example). Tax treaties already deal with this, it’s a hassle but I think a reasonable exchange for the benefits of citizenship/residence in the UK.
I agree with your conclusion