The Labour Party will scrap an inheritance tax (IHT) “loophole” applying to individuals with “non-dom” status if it wins the next General Election.
Shadow chancellor Rachel Reeves confirmed the plans which will reportedly generate £2.6billion annually over the course of the next parliament.
This will be done by closing “loopholes” in the Government’s plans to abolish exemptions for people who are not domiciled in the UK for tax purposes.
Revenue raised by this tax policy will be used to fund the NHS and schools, the shadow chancellor claims.
As part of this year’s Spring Budget, Chancellor Jeremy Hunt outlined plans to abolish the non-dom tax status in the UK.
An individual with non-domiciled status does not have to pay taxes on money they make in another country.
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Labour has announced plans to tackle an nom-dom tax loophole
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By announcing this policy, Mr Hunt effectively undercut Labour’s funding plans for its two flagship pledges: more funding for the NHS and free breakfast clubs for primary schools.
Speaking to BBC Breakfast, Ms Reeves outlined why scrapping this specific IHT loophole will help Labour fund its plans in Government.
She explained: “The Government’s plans that they announced in March about non-doms, they said they were taking our policy, well it turns out they’ve taken it but left a load of loopholes in it.
“And so if you are a non-dom you can still get out of paying inheritance tax: in the first year of their policy there’s a 50 per cent discount, we don’t get 50 per cent discounts on our taxes.
“People who go out and work today – teachers, plumbers, doctors, they don’t get a 50 per cent discount – why should some of the wealthiest people in the country get that discount?
“We would abolish that and we would put that money into frontline public services, where it belongs.”
During his Spring Budget, the Chancellor said: “The Government will abolish current tax system for non-doms, get rid of the outdated concept of domicile.
“We will replace the non-dom regime with a modern simpler and fairer residency.”
This overhaul meant those with non-dom status are only able to earn money from abroad without having to pay tax for four years, reduced from 15 years.
After this period, non-domiciled individuals who continue to live in the UK will pay the same as everyone else.
As part of this inheritance tax raid, the shadow cabinet member confirmed the Labour Party will “ramp up” plans to overhaul HM Revenue and Customs (HMRC) if returns to office.
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Jeremy Hunt outlined reform to non-dom tax rules during the Spring Budget
PAMs Reeves said the party could increase the number of HMRC staff “pretty quickly” as part of Labour’s wider plan to crackdown on tax avoiders.
As part of this plan, Labour has promised to invest up to £555million a year to boost the number of compliance officers at the department to improve productivity.
“You can ramp it up pretty quickly. At the start you might need to bring in extra resource but then you need to train people up within the government to do this work,” Ms Reeves added.
“This isn’t rocket science, previous governments have managed to close that tax gap, as it’s called.”