Confusion reigns over 'nom-doms' facing Tory tax

Accountants, politicians and think-tanks could agree on just one aspect of Conservative plans to tax non-domiciled residents yesterday: that there is little certainty that any of the estimates of their numbers are accurate.

The popular image of the "non-dom" is clear: foreign billionaires such as Roman Abramovich, Mohamed al-Fayed and Lakshmi Mittal living here and paying no tax apart from a few pennies of duty on the petrol in their limousines. The shadow chancellor, George Osborne, chose them as the target for his £25,000 ann-ual levy to pay for a virtual abolition of inheritance tax. Thus a modest charge on the few pays for a tax cut for the many.

However, doubt was sprayed over the Conservatives' proposals yesterday. The last official Treasury estimate put the figure of non-domiciled residents – people resident in the UK but entitled not to pay tax on income from overseas – at 114,000 in the tax year 2005-06, with Mr Osborne assuming that the number has by now risen to 150,000.

But, according to the Treasury, all that an averagely paid German City worker or even a Filipino maid in the UK has to do to gain "remittance basis for income and gains" is to tick the box on their tax return, taking them into the count.

This, the Chancellor said, created a "black hole" in Mr Osborne's sums. Labour claimed, on Treasury briefings for ministers, that a tiny number of non-domiciled residents – 15,000 – had sufficiently substantial income from abroad to make a £25,000 fee worthwhile (equating to around £62,000 of offshore income or gains).

However, the independent Institute for Fiscal Studies and professional tax experts alike said that they were at a loss as to how such a number could be determined.

The Treasury yesterday said the number came from an audit of tax returns filed to HM Revenue & Customs, but refused to publish the research. Mr Osborne has therefore written to the permanent secretary at the Treasury asking "why it is the case that information which the Treasury refused to give to Parliament appears to have been given to the Labour Party."

Accountancy Age, quoted by David Cameron in support of his upper estimate of 200,000 non-domiciles, said it had simply quoted numbers from the newspapers, and that the estimates represented "back-of-an-envelope figures".

Stuart Adam of the Institute for Fiscal Studies said the think-tank had "said nothing at all" about the opposition's plans, and: "there are risks attached to their numbers, to say the least – whether they can get as much money from the non-doms as they would like. It's a basic uncertainty."

Certainly, non-doms are a more varied group than popular perception allows. For example, Carolyn Steppler, tax director at accountants KPMG, pleaded that she has no Russian clients. "They are diverse; entrepreneurs running businesses, employees of multinational companies, sometimes retired people who may come to the UK to look after grandchildren and may happen to have their assets abroad," she said.

"Sometimes they will have assets in another Euro-pean state under their own name rather than an offshore trust".

Some non-doms, believes Mrs Steppler, may wish to pay the £25,000 charge as a simple lump sum as an alternative to a very complicated process of form-filling; others might not.

Andrew Tailby-Faulkes, tax partner at Ernst & Young, described Mr Osborne's idea as "left field" , saying he was "not sure how it would go down" with his clients, some of whom, apparently, believe they bring enough money – in terms of business – into the UK.

One problem surrounds the tax treatment of American non-doms, because they are required to pay tax to the US authorities wherever they are. The UK-US tax treaty that allows them to offset one liability against the other only covers income taxes – and it is not certain that Mr Osborne's £25,000 would be treated as a tax or an arbitrary fee by the US Internal Revenue Service. Mrs Steppler said American non-doms would be "right to be worried".