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‘Ghost dom’ tax loophole hampers efforts to stop sanctioned Russian money flowing into UK Business News

Efforts to prevent the flow of sanctioned Russian money into the UK are hampered by a tax loophole that allows the wealthy not to disclose details of their assets or income to authorities, The Independent can reveal.

The provision – dubbed ‘ghost dom’ – allows someone to claim both non-domicile status and the fact that they have no income in the UK. It also means they don’t have to submit a tax return, even if they live permanently in Britain.

Investigators from the UK’s new anti-corruption force – the National Crime Agency’s Kleptocracy cell – are growing frustrated over their struggle to target high-profile Kremlin-linked Russians who have been listed black during the war in Ukraine.

An official working on UK sanctions policy said The Independent that the UK tax system, and more specifically the ‘ghost doms’ and non-doms, ‘has severely limited’ their ability to track and trace the income streams of individuals.

Another said it was impossible to know the extent of the use of ghost dom status, but that its ability to harbor criminal or other unwanted activity was a “serious concern”.

Labor said the loophole should be closed as “a matter of national security”.

Some 70,000 people claim non-dom status each year, according to official figures, but there is no record of how many ghost-doms exist in Britain. Unlike non-doms, ghost doms pay no income tax as they claim to have no UK taxable income.

Sources added that the lack of data on non-doms and ghost-doms is a “known problem” within the Treasury and that some officials had noted the potential benefits of reforming these statutes in recent months.

These “ghosts” within the UK tax system are often some of the richest people in the world, wives, mistresses or children of criminals or high-ranking foreign politicians, as well as quite legitimate people such as wealthy pensioners.

The scrutiny of Britain’s tax regime has intensified in recent weeks after The Independent revealed that Akshata Murty, the wife of Rishi Sunak, has a non-domiciled status. Ms Murthy, an Indian citizen whose family business is estimated to be worth around £3.5billion, continued to use non-dom status after her husband became chancellor in 2020.

It was revealed days later that Sajid Javid, currently health secretary, had held controversial non-dom status for six years while working as a banker. Mr Javid also used an offshore trust while working as a key aide to George Osborne in 2011, which reduced his personal tax burden.

Rachel Reeves, Labour’s shadow chancellor, said the revelation of the shadow dom raised serious issues.

“It’s extremely concerning – and not just because of how the few at the top are profiting as British workers and businesses are hit with the biggest tax burden in 70 years,” she said. . The Independent.

“This is a matter of national security that needs to be addressed urgently to ensure it does not hamper our efforts to crack down hard on dirty money linked to Russia, as the horrific invasion of Ukraine by Putin continues.”

Labor has promised to abolish the tax status of non-doms, which they have called “outdated”.

The kleptocracy cell, linked to the UK’s National Economic Crime Center and former money laundering experts from the Department for International Development, was set up earlier this year.

“Ghost doms” rely on Section 809E of the 2008 Finance Act to justify no tax claim and use of the status is not an indication of wrongdoing in itself.

But while some wealthy people who are “completely normal” use the provision, others are a hidden “super elite” in the system, according to a wealth adviser who has guided clients to use the provision.

These are often people for whom the risk of further litigation, if their financial affairs are investigated in the UK, is less inconvenient than sharing details of the source of their income with HMRC. , said the adviser.

They asked to remain anonymous due to the sensitivity of their clients’ affairs. “It’s just one less data point if there’s no tax return,” they added.

They said they advised wealthy people, including people with Russian, Belarusian, Kazakh and Iranian nationality, to use this status.

The type of individuals who could use such mechanisms, and where they could intersect with sanctions policy, could include figures such as Polina Kovaleva, the alleged daughter-in-law of Russian Foreign Minister Sergei Lavrov, the report said. even advise. The UK has been criticized for its delay in sanctioning Ms Kovaleva earlier this year.

Dan Neidle, founder of Tax Policy Associates, a nonprofit tax policy consultancy, said there’s a broader issue of transparency around the affairs of those who use nondom status.

“Non-doms are a black hole. HMRC has no information on their returns on their income or global assets.”

Individuals can simply become non-doms by using a separate “clean” offshore…

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Source: www.independent.co.uk
This notice was published: 2022-05-09 15:10:11

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