A second Tory cabinet minister has become embroiled in the “non-dom” storm as health secretary Sajid Javid admitted he held the status for six years.
This means he did not pay tax on his overseas income during the period in the 2000s.
It comes after the disclosure that Akshata Murty, the wife of chancellor Rishi Sunak, was “non-domiciled” in the UK. Following the subsequent political controversy, she announced on Friday that she would pay UK taxes on her worldwide income.
Now Javid has admitted his past non-domiciled tax status, as first reported by the Sunday Times.
Javid, a former chancellor himself, became an MP in 2010, the year before which he “proactively chose to give up my non-domiciled status”.
In a statement, he said: “I have been domiciled in the UK for tax purposes throughout my entire public life. Given heightened public interest in these issues, I want to be open about my past tax statuses.
"My career before politics was in international finance. For almost two decades I constantly travelled around the world for work.
“For some of those years I was non-domiciled for tax purposes, but I paid all UK taxes due on my income and have always done so.
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“In 2006 I moved to Singapore with my family and was therefore no longer a UK tax resident.
"In 2009, upon my return to the UK, I became tax-resident in the UK again and also proactively chose to give up my non-domiciled status by making the UK my ‘domicile of choice’.”
What is non-dom status?
Someone with non-dom tax status does not have to pay UK tax on their foreign income or gains.
It typically applies to someone who was born overseas and spends much of their time in the UK but still considers another country to be their permanent residence or “domicile”.
People can also inherit their domicile from their parents, meaning they can be born in the UK but have non-dom status. Javid was born in England but said he was entitled to non-dom status as his father is from Pakistan.
Those who earn more than £2,000 from overseas, or bring any money into the UK, can choose to pay UK tax on it – although this may be claimed back.
Alternatively, they can pay an annual charge for exemptions, depending on how long they have been in the UK.
Once someone has been a non-dom for at least seven of the last nine tax years, they must pay £30,000 a year, or £60,000 for at least 12 of the previous 14 tax years. Akshata Murty confirmed she had been paying the £30,000 fee to keep her non-dom status.
For high net-worth individuals, many will opt for the yearly charge because the income received from foreign businesses and investments is likely to lead to a far higher tax bill.
Why has it been controversial?
In the case of Murty and Javid, the question has not been legality.
Instead, Labour has been attacking the government from an ethical standpoint amid the cost of living crisis.
Sunak has been accused in recent weeks of not doing enough to help those in the greatest need - while hiking taxes to the highest levels since the 1950s.
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All the while, the opposition has said Sunak and his family potentially saved tens of millions of pounds in taxes through millionairess Murty’s non-dom status.
Shadow home secretary Yvette Cooper said on Sunday it was a matter of “basic fairness” that the chancellor’s family should pay tax in the same way as everyone else, and should not enjoy “special arrangements” to reduce its bills.
Minister Kit Malthouse said it was “not a brilliant time” for the details to come out when the country was struggling with the cost of living crisis, but said Murty had now “corrected” the situation.
Backbencher Tobias Ellwood is among the Tory MPs to have said non-dom rules are "out of date" and "need to be reviewed".