Ed Miliband will promise to abolish the non-domicile rule if he wins the election, a move that Labour claim could raise hundreds of millions of pounds.
The ‘non-dom’ rule allows many of Britain’s richest permanent residents to avoid paying tax in the UK on their worldwide income and was introduced in the 18th century.
In a speech in Warwick on Wednesday, the Labour leader is expected say that the rule has been wide open to abuse and offends the moral basis of taxation. He will argue who has made the UK their permanent home should pay full UK tax on all income.
But Labour have refused to put an official estimate on the amount to be raised by the move, as the numbers are disputed.
The non-dom rule is unique to the UK and is estimated to be used by around 110,000 wealthy individuals, dubbed ‘non-doms’.
Tory Party members have warned of the consequences however saying it will lead to wealthy people leaving the UK. Michael Gove, Chief Whip of the Conservative party told Newsnight it would mean an exodus of talent.
Non-doms only pay UK income tax and capital gains tax on their UK income and gains whereas domiciles have to pay tax on all income and gains.
The move was praised by British tax researcher and accountant Richard Murphy.
Murphy wrote in his blog: “Everyone in the UK will now be equal in UK tax law. It is about creating justice, a level playing field and a single tax system in the UK that ends part of our tax haven status. And for all those reasons I think this is an enormously welcome election promise. A nail has been put in the coffin of the UK tax haven.”
Former Dragons Den star, Duncan Bannatyne, who last week signed a letter accusing Miliband of threatening Britain’s economic recovery tweeted his support.
Ed Milliband says he will abolish non-dom status in UK. This gets my vote I never thought any party would have courage to do this.
— Duncan Bannatyne (@DuncanBannatyne) April 7, 2015