Sajid Javid ‘exploited non-dom tax loophole’ while MP working in Treasury

Exclusive: The Conservative leadership hopeful used the status to minimise his tax bill via an offshore trust

Sajid Javid exploited a tax loophole to benefit from non-dom perks while working in the Treasury as a ministerial aide, The Independent understands.

The Conservative leadership hopeful, who on Monday called for greater scrutiny of candidates as he launched his campaign, would say only that he gave up the controversial tax status “before entering public life” and refused to answer further questions on his tax affairs.

But according to sources familiar with Mr Javid's tax planning, while the former health secretary gave up non-dom status in 2009, he preserved some of the tax benefits through an offshore trust until 2012. This step, which is entirely legal, allowed him not to pay UK income tax on some foreign income from investments. From 2011, Mr Javid worked in the Treasury as a ministerial aide to then chancellor George Osborne.

While MPs are not allowed to use non-dom on a so-called personal basis, for either income tax or inheritance tax purposes, they can still benefit from it via trusts. This is because trusts are legal entities in their own right, like companies, according to tax experts.

Dan Neidle, founder of Tax Policy Associates Ltd, told The Independent: “Non-dom status runs out after 15 years. It's standard planning for non-doms approaching this limit to put their foreign property into an ‘excluded property trust’. That effectively preserves the benefit of non-dom status forever.”

“To my mind, this is tax avoidance – parliament intended that non-dom status end, and this is a loophole that avoids that result,” he added.

Mr Javid has refused to say where his trust was based, but he has said it was not dissolved until 2012, when he had already started his political career and was serving as a PPS – the eyes and ears of the then chancellor.

He told reporters on Monday when asked about where he was historically domiciled for tax purposes: “I’m not getting into any more detail about my tax affairs that were to do with a time that I was not in public life. I haven’t been non-domiciled in all my time in public life.” Approached separately by The Independent, Mr Javid's spokesperson declined to comment on use of non-dom perks while an MP.

The tax status of leadership contenders has been in the spotlight after The Independent revealed that HMRC experts were investigating chancellor Nadhim Zahawi’s financial affairs. Earlier this year his predecessor, Rishi Sunak, now the leadership frontrunner, faced questions when it emerged that his wife, Akshata Murty, had used non-dom status.

When asked about publishing his tax returns on Sunday morning, Mr Javid said: “I have no issue with transparency like that. I think if I get in the final two, the final two candidates should be quite open about their tax affairs.”

Meanwhile, Mr Zahawi has vowed to “answer any questions that HMRC has of me” and publish his accounts annually if he succeeds Boris Johnson at No 10. Mr Sunak is yet to comment on publishing his tax details.

Being so-called non-domiciled on a remittance basis allows individuals to only pay UK tax on their income derived in Britain, rather than, like ordinary citizens, their entire worldwide income.

Mr Javid said on Sunday he had used non-dom status on his tax returns for about “four or five years” in the 2000s.

The then cabinet minister said in a statement about tax affairs in April this year that he dissolved a trust when he became a government minister in 2012 and incurred 50 per cent income tax “on those assets” – the “heaviest possible tax burden”. This would have wiped out any accrued tax benefits, he said.

He has also said repeatedly that he had always declared the information required by tax, government and parliamentary authorities.