Monday, October 01, 2007

Labour Wrong-Footed over Inheritance Tax Funding

Labour seem to be flailing around all over the place on George Osborne's Inheritance tax proposals. Alistair Darling claimed earlier today that the number of non-domiciles in 2008-09 will be below 150,000. He is simply wrong. Expert analysis cited by Accountancy Age and others shows that it is likely to be in excess of 200,000 following rapid recent growth. A CCHQ press release claims...

* Labour's claim that the majority of non-doms wouldn't pay the full amount is also incorrect - the Treasury's own figures show that the vast majority will choose to pay £25,000 rather than bring all their foreign income onshore.
* Third party experts such as Grant Thornton and the CBI back the Tory position that £25,000 is not a significant amount for most non-domiciles.
* Labour wrongly claim that US citizens will not be able to reduce their US tax. This is also incorrect.

UPDATE: The Treasury's latest attempt to attack Conservative figures has spectacularly backfired tonight. Alistair Darling claims that only 15,000 non-doms have off-shore incomes over £60,000. This is not a figure the Treasury have ever given before. Indeed, on 30th April 2007 Ed Balls answered a question in Parliament saying the Treasury did not have such information.

"Estimates of the tax foregone in the UK as a consequence of the use of the
remittance basis by those not domiciled in the UK are not routinely made.
Information is not held on overseas income and gains that do not give rise to a
tax liability in the UK." (Ed Balls MP, Hansard, 30 Apr 2007, Column 1383W)

As Dawn Primarolo said this is because non-doms are not required to disclose this information: "In general, individuals do not have to inform HMRC of their foreign income or gains unless this is relevant to their UK tax liability." (Dawn Primarolo MP, Hansard, 8 Mar 2007, Column 2220W).

UPDATE: The estimable Ben Brogan is accusing Labour of misusing civil servants...

What strikes me though is the scale of the Labour spin operation tonight, which is designed to turn a "Tories promise you tax cut" story into a "Tories rocked by funding row" tale. I have in my inbox a press release from the Labour Party Press Office, in which Alistair Darling, the Chancellor of the Exchequer, claims: "Today George Osborne made a £3.5 billion tax commitment. Treasury analysis shows it is impossible for him to raise the money he needs to pay for this commitment from his proposals on residence and domicile. Initial costings by the Treasury show that George Osborne's proposal would raise a maximum of £650m, leaving George Osborne at least £2.9 billion short. So George Osborne cannot afford the promises he is making. He cannot afford to cut inheritance tax." The italics are mine, but I look forward to hearing from the Treasury tomorrow why exactly its civil servants and this Government department are doing party political work to undermine another political party's conference.


Marquee Mark said...

In fact, we may see a net inflow of non-doms to the UK - if all they have to pay is £25k. Which will be good for the overall economy - I wonder how much Lakshmi Mittal pays in UK VAT in an average year, for example.

kinglear said...

Ah yes, but the flailing about doesn't matter - they are rubbishing Tories, which is all they can do.
And did anyone notice that "guarantee" is effectively only another couple of thousand pounds - but announced with huge gravitas .The best thing on BBand F last night was a stooge trying to get GB to understand a joke....

Anonymous said...

Looks as if Alistair Darling has 'cut' his savers guarantee scheme. £100k to £35k is quite a large difference.

tim said...

So George took into account what the non doms earn in his figures Ian?

Anonymous said...

Quite a coup for the party with even Vince Cable agreeing on the BBC.
Australia has already proved that inheritance tax is a spiteful, non productive assault on hard working, prudent citizens and anyway anyone with enough money to worry about can easily put it offshore with a whole industry waiting to help them do it. Far better to let them keep what is theirs and let them pay some taxes.

Anonymous said...

Non-doms are not a short-term aberration. In the new globalised economy it will become very much more common. I know of several UK born and raised residents who work for overseas paymasters and have managed to set up non-dom arrangements in the last couple of years.

sweet said...

What a day to be a Conservative, this is stonking stuff. I bet Brown's chewing his nails tonight!

Anonymous said...

The squeals and rubbishing from Labour and their media stooges is a sure sign that these proposals are drawing blood. Brown keeps harping on about helping hardworking British families yet he's not prepared to do something about IHT ? That isn't going to go down well with the so called "Blue Brownites" -if they ever existed outside the fevered imagination of the left wing MSM.

PSJ said...

Wow! An eye-catching initiative that has substance, is easy to implement and has NuLab on the back foot. Maybe tax cuts on the middle classes are cool again for the first time since about 1988?

That was our left-handed jab. Now we need a right-handed punch like, for instance, a binding referendum on an English Parliament, or some form of constitutional fairness for England. Then we'll have Broon on the ropes.

Of course, he'll simply nick our ideas where he can get away with it, but what do you expect?

tim said...

Oh dear.
Channel4 news.
Institute Of Fiscal Studies reckons George may not have looked at the income of the Non Doms.

If he hasn't well.
Doesnt bear thinking about

Man in a Shed said...

Gordon won't be pleased - someone to to get it in the neck over this one ;-)

Anonymous said...

But isn't this all a bit pointless if people are having to sell their houses to pay for long term personal care ?

It doesn't happen in Scotland, and that is run partly by Labour [from Westminster] and partly the SNP in the Scottish Government. And not a Tory in sight !

Travis Bickle said...

The only hard working families whio can trust Brown is on their side or those that work hard to milk the benefits system.

Any IHT savings are small beer compared to the figure Labour and their supporters are happy to screw honest taxpayers out of every year by almost encouraging benefits dependency and fraud. Surprisingly no anonymous squealing about that one though

Man in a Shed said...

Tim - Channel 4 news are rather confused. At one point they seemed to be suggesting it was about taxing Brits living abroad, but seemed to clear it up later.

Maybe the Labour party hadn't texted them with the line to take yet and they're just working on their own initiative.

ITV news was much more unequivocal. There expert said it was good, funded, and the right thing to do.

The Labour spin trolls will be furious with them. ( Haven't managed to see the BBC yet - no doubt they have a hatchet job of some form).

tim said...

If Osborne has blown his calculations here then forget the rest of the argument.

If hes presuming Nurses are in the £25k per head calculation,then he's a laughing stock

tim said...

All I'm asking Shed is:
Did Osborne include people like nurses in the £25k tax take?

Anonymous said...

man in a shed - think you may have a point - check out Peston's Picks..

judith said...

I really can't see why anyone would listen to the Government wittering on about finance or population estimates, given that they have *ucked up both, time and again.

John said...

"The squeals and rubbishing from Labour and their media stooges is a sure sign that these proposals are drawing blood."

I love this. The more people tell you your policy is nuts, the more convinced you are that it's right. Tell you what, reintroduce the poll tax, it's a sure thing.

Geezer said...

"I love this. The more people tell you your policy is nuts, the more convinced you are that it's right. Tell you what, reintroduce the poll tax, it's a sure thing."

Labour and their media stooges are not PEOPLE, you sad Labour troll.

Travis Bickle said...

As it happens poll tax was a damned sight fairer than council tax. Shame Maggie lost her nerve on that one.

John said...

"Labour and their media stooges are not PEOPLE, you sad Labour troll."

Troll (n.): Someone who thinks some Conservative policies are wrong. See also the Greek words 'astro', meaning 'one who disagrees', and 'turf', meaning 'with David Cameron'.

Anonymous said...

Ben Brogan has posted re a press release he's received from the Labour Party Press Office seeking to rubbish George Osbourne's calculations, which also admits using civil servants to carry out that (party political) work...

Anonymous said...

Nurses coming to work here are one thing, but what about merchant sailors? They may well be domiciled abroad at "no fixed abode" (a ship) for large parts of the year but £25k would be most of their salary.

The policy is in danger of being seen - at best - as a demand for payment for unused services and - at worst - as an attack on a broad range of non-traditional workers in the globalised economy. Some sort of threshold or tapered system should be applied.

Travis Bickle said...

Oh dear. Domicile and residence are 2 entirely separate things!

In order to be deemed non UK domiciled (to set up an offshore trust) you would need to be classified as non UK resident for 17 out of 20 years but for day to day tax purposes you remain UK domiciled all your life.

The sort of people Osborne is looking at are the Al Fayed's and Abramovitch's of this world who are UK resident but will never be UK domiciled unless they completely disown their country of domicile.

mutleythedog said...

I was expecting to see you in the "Oceania Bar" where were you?

tory boys never grow up said...

Where is the expert analysis cited by Accountancy Age - I cannot see it on their website.

How many of the current non domciles are teachers/nurses/doctors or others who get most of their income from work they perform in the UK - which is taxable in the UK. It is only the rest with substantial overseas incomes that will still benefit from the £25k - and I somehow doubt there are 150,000 of them. If the wallpaper man cannot show otherwise he has messsed up big time!

Even then a flat £25k tax isn't fair - perhaps someone could explain how it is consistent with Adam Smith's tenets of good taxation. Even the flat tax nutters only argue for a low fixed rate not a fixed amount.

Also wonder how many rich UK citizens will now try and avoid taxes by suddenly trying to change their/their relatives domicile and/or trying to argue they were never domiciled (believe me they will try if the £25k comes into force). How much tax will be lost as a result. One of the worst things about the Tories in recent times is how they almost always any attempts to reduce tax evasion.

If George really wants to raise some extra tax - how about doing something to stop all the small businessmen claiming back VAT and tax relief on their personal expenses and all the stamp duty fiddles on expensive properties - has anyone noticed how everyone asks you if you want a VAT invoice even if it clearly isn't a business expense. Somehow I doubt he will.

Travis Bickle said...


you are confusing residence and domicile (easy mistake), plus tax and benefit (not such an easy mistake).

Tax evasion is illegal under all governments, Labour has been as supportive of legal tax avoidance schemes (for very rich) as any previous Conservative legislation.

None of these very rich politicians, or civil servants, like paying taxes any more than the rest of us do.

Chris Paul said...

Channel 4 News and Steph Flanders on Newsnight - a Tory leaner - absolutely disagree. The IFS guy was laughing his cock up at the Tory cock ups here. And then Alan Duncan claimed he was on board. Oh dear oh dear oh dear.

Wrinkled Weasel said...

There are some kooky ideas floating about. Philip Hammond said today, citing John Redwood's policy document on finance, said, "and we will put a tax on foreign lorries that use the roads in this country".

Oh no you won't.

Firstly, the EU won't let you do it, and second, if, by some clever sleight of hand you do, each and every country will reciprocate and charge the UK haulage industry accordingly.

(There is a precedent for this kind of bickering between EU states, but I cannot remember what it is)

So at best, this bit of policy will not leave the starting gate, but at worst, it will incur penalties for the haulage industry, who will of course pass it on the the consumer.

Does that amount then, to a stealth tax or not?

Chris Paul said...

Lakshmi Mittal - UK VAT - you are a Labour troll right? Clearly he pays no income tax, no VAT. He probably massages any stuff he buys with VAT on through some company and GETS IT BACK.

NON DOMS are ripe for the picking. But this move is incredibly badly costed. Even the independent IFS exceeded their TWA limit and ROFL.

Londoner said...

"Steph Flanders on Newsnight - a Tory leaner"

You must be joking! Didn't you see her part in the Cameron Newsnight interview the other week?! Shurely shome mistake.

Ironically the rise in the Inheritance Tax threshold might make some non-doms less insistent on keeping that status. One of the main advantages of Non-Dom status is not income tax, but the consequence that only your UK assets are subject to IHT. On reflection, such a threshold as £1m may not be low enough for them.

spotthewasteofspace said...

Chris - totally agree. How can these YXFs with their BNA and TWP be expected to EFFING understand this whole subject? After all VAT can be SZIJK if it's been re-cycled through an offshore Part14Z submission.

Right? PRATT?

Anonymous said...

"and we will put a tax on foreign lorries that use the roads in this country. Oh no you won't.

Firstly, the EU won't let you do it, and second, if, by some clever sleight of hand you do, each and every country will reciprocate and charge the UK haulage industry accordingly.".

wrong wesel.

It's EU policy, look it up. A trans-European lorry charging scheme is already booked in, and should be happening by 2011 if I remember rightly.

have you checked those new cameras in the cpaital? My guess is that are not just for the so-called low emission zone, they are also card-readers for the road tolls.

The tolling hardware is already laid on most of the motorway hard shoulders in the UK. How do you think they are going to toll Greater Manchester? The same useless 'technology' used in London?

Rob Blackie said...

I find the whole policy extremely annoying. When the Lib Dems proposed the policy the Conservatives said it was irresponsible (have a look in here:

In fact as we speak it is officially the Conservative policy that restricting non domicile tax relief is irresponsible when done by Lib Dems - but the identical policy is responsible when done by the Conservatives.

abandon said...

Well the BBC and the papers are running with the Tories getting the figures wrong, rather than the policy.

After grammar schools, the closing hospitals debacle, the mistakes in the green taxes calculations and now this, surely someone in the research department is going to be taken out and shot?

Anonymous said...

Sorry guys, this is delusional.

Even if Boy George got his figures right, which seems unlikely, and even though the inheritance tax thingy is a good policy it ain't gonna win no election for you.

On the other hand. We have globalisation exporting UK industry to India and China. The rubbish jobs left in the UK increasingly given to cheap labour from Poland and Pakistan. The real alternative Tory solution? Blame the unemployed! Hilarious. Now that can lose you the election - people may as well vote nulab.

Wrinkled Weasel said...

anon 3.58.

Yes, It seems I was wrong. A lot of work has been done to introduce this Europe-wide, by the EU itself. There is a very interesting piece on the issue available at

found under "trans european lorry charging".

It is, however, filled with potential pitfalls, as the article reveals.

So, if it is going to happen anyway, why are the Conservatives heralding EU policy as a feature of their own policy document?

Anonymous said...


Responding to George Osborne’s speech to the Conservative party conference this afternoon, Liberal Democrat Shadow Chancellor, Vince Cable MP said:

“Any expectation that the Conservatives had a radical and meaningful plan for fairer taxes has been blown out of the water with this utterly feeble set of half promises and unfunded commitments.

“We support the principle of raising the threshold of inheritance tax but where we have put forward practical proposals for reducing avoidance from very big estates, the Tories have apparently made a large open-ended commitment without explaining how it will be paid for.

“They have borrowed from the Liberal Democrats the idea of taking action on non-domicile residents in the UK but their proposal is completely inadequate and seems to be entirely voluntary.

“We agree that the burden of stamp duty should be cut, but George Osborne is missing the point. The real problem occurs for properties worth £250,000 or more that carry a 3% tax on the whole value of the house purchase. George Osborne did not suggest anything to deal with that and is unable to explain how his proposal will be financed.

“After all the huffing and puffing about green taxes, the Tories have backed away from any meaningful commitment to shifting the burden of taxation from work onto polluting activities. The so-called family fund will not offer a genuine tax cut but a means-tested benefit which will be denied to families whose parents are unmarried or to the families of widows.”


Notes to Editors

The Liberal Democrats propose cutting income tax, taking the basic rate of income tax to its lowest level since 1916. The move to cut the basic rate by four pence in the pound will reduce the basic rate of income tax to 16p, benefiting millions of people on low and middle incomes.

The plans lift the tax burden on low and middle income earners whilst making the rich and people with environmentally damaging lifestyles pay a fairer share.

The revised proposals are tax neutral and have been independently evaluated by the IFS. The proposals include:

· Reaffirming the commitment to abolishing Council Tax, replacing it with a tax based on ability to pay
· Removing tax loop-holes exploited by the super-rich
· Radically simplifying the tax code, removing over 500 pages of unnecessary regulations
· Reforming stamp duty to reduce the amount of tax paid on properties worth less than £500,000
· Reforming Inheritance Tax, with the aim of raising the starting threshold to £500,000

Anonymous said...

You have lost this debate also since the media have ignored it-you need some attack dogs.