Why are HMRC not challenging non-dom status?

There's a surprising dearth of data on non-doms in the UK. In one sense this isn't a surprise. The overwhelming majority of the perhaps 4.9 million non-doms in the country won't have substantial assets or income abroad. Their domicile status won't be of interest to them - and it won't be of interest to HMRC.

But even in relation to those for whom the status is financially meaningful, data is not routinely published. About 114,000 were registered non-doms 2005-06 (before the introduction of the 'remittance basis charge'). And about 118,000 were registered in 2009-10 (after its introduction): the latest year for which I have been able to find data. Of those 118,000, the charge was paid by 5,100 people (4.3%). Many of the remainder are likely to be 'newer' non-doms: the charge is only payable if you have been resident in the UK for seven out of the preceding nine years. (Putting the matter another way, you can be a resident non-dom for six years and claim the remittance basis without incurring liability to the charge.)

So the figures we have are out of date. But the more important data deficit - for those attempting to understand the tax consequences of our decision to maintain non-dom status - is our ignorance of the amount of tax we forego. As Ed Balls explained back in 2007, information is not held on overseas income and gains that do not give rise to a tax liability in the UK.

The numbers will be substantial, though. Iain Tait, who heads the Private Investment Office of London & Capital, described the £50,000 remittance charge as "largely symbolic." However you carve it, there will be many billions at stake.

One of the odd things about non-dom status - and there are many (see this piece I wrote last Friday) - is that your possession of it at any given time is a matter of your then present intention as to your future status. I was brought up in New Zealand: do I now intend to return there at some stage in the future? That might not be such an easy thing for HMRC to assess. But judges are well used to such questions. State of mind is a critical element of pretty much every criminal offence. It's also worth remembering that the burden of proving possession of non-dom status rests on s/he who claims it.

Against that background - vast amounts of tax at stake and so every reason for both sides to fight, a Revenue authority which may not be best placed to assess status, and judges trained to do exactly that - you might expect to find a slew of cases in which HMRC have sought to test entitlement to domicile in the courts. I know I did. But I was wrong.

In the last ten years (which is as far back as I checked), there's only been one concluded challenge to domicile, nine years ago. There's also a single indication of a challenge to come.

Many of us in the profession are surprised at HMRC's seemingly ready acceptance of assertions of UK non-dom status. This morning's Guardian account of Stuart Gulliver is a good example: it reports he went to University in Oxford, lives in the UK and is married to an Australian. The FT adds that he grew up in Plymouth, and chooses to be based in London. The Independent says he was born in Derby. But he is nevertheless, apparently, accepted to be domiciled in Hong Kong. Now, I'm not saying that conclusion is wrong - but it does raise questions.

What does all of this evidence? A reluctance on the part of HMRC to take on the richest and best-lawyered? A policy decision not to alienate the most mobile? Or merely that us tax professionals are wrong to be surprised. Whatever the answer, it's a pretty striking state of affairs.

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