Wealthy British expats in Hong Kong face end to ‘non-dom’ tax loophole under Labour plan

A new pledge by the Labour Party in the UK could mean major tax changes for some of Hong Kong’s wealthiest British expatriates if the party is voted into power in elections next month.

Labour leader Ed Miliband yesterday vowed to abolish the country’s “non-dom” tax rules, which would mean expats returning to Britain permanently would no longer be able to claim domicile in Hong Kong for tax purposes.

The current situation is best illustrated by the case of HSBC chief executive Stuart Gulliver, who – although born in the UK and resident there for the past 12 years – claims domicile in Hong Kong, where he lived previously, for legal and tax purposes.

“The domicile rule will disappear for the purposes of expats living in Hong Kong,” Richard Murphy, a prominent economist and architect of the proposal, told the South China Morning Post.

“Under the proposed changes, if British expats in Hong Kong return permanently to the UK, they will be taxed from day one,” Murphy said.

The proposal by the Labour Party could affect around 116,000 people who currently live in Britain, but do not have to pay UK tax on income earned abroad under the so-called non-domicile, or “non-dom,” tax rules.

The rules, originally devised 200 years ago to appeal to colonial businessmen, are today mostly used by oligarchs and executives and have been at the centre of public anger in the UK over the perceived preferential treatment of the elite.