Treasury 'climb-down' on non-doms

Chelsea boss Roman Abramovich will likely be affected

The Treasury has been accused of climbing down over its plans to tax wealthy foreigners living in the UK, after it moved to clarify its position.

The government aims to target non-domiciled foreigners who live in the UK but say their real home or "domicile" is elsewhere.

At present, these "non-doms" pay no tax in the UK on their overseas earnings.

The Treasury wants them to pay £30,000 a year, but now says it will not need full earnings details or back payments.

'Misunderstandings'

Treasury Chief Secretary Yvette Cooper made the clarification in an interview with the BBC.

We don't need to know the detail of people's worldwide income if they are going to be paying the £30,000 Treasury Chief Secretary Yvette Cooper Find out more about non-doms

She admitted that there had been "misunderstandings" over the government's plans, because of the wording in the draft legislation document drawn up by officials.

Ms Cooper insisted there had never been any plans to "snoop" on the global earnings of wealthy foreigners living in the UK, nor to seek payment of taxes for previous years.

Under the government's plans, wealthy non-doms will be eligible to pay a flat £30,000 in tax a year - once they have lived in the UK for seven years - or else sign up to the existing British tax structure.

"We don't need to know the detail of people's worldwide income if they are going to be paying the £30,000," said Ms Cooper.

'Common sense'

Shadow chancellor George Osborne said the Treasury's clarifications amounted to a "climb-down" by Chancellor Alistair Darling.

Ministers should not swallow the line that this move will hit business or the nation's prosperity Brendan Barber, TUC

The Treasury had faced mounting criticism over its non-doms tax plans, including from one of its own ministers, Trade and Industry Minister Lord Jones.

CBI deputy director general John Cridland, said the Treasury's clarification was "a victory for common sense".

"The proposals were clearly cobbled together in a hurry and went a lot further than the 230,000 headline figure, with the clauses on trusts and the retroactive aspects for taxing gains particularly punitive."

"It was not just a tax on the 'super-rich' but affected tens of thousands of accountants, lawyers and managers who work hard in the UK and help generate huge amounts of wealth for the economy and the Treasury."

Caving in?

However, the government came under pressure from union leaders to stand firm against business opposition to the tax crackdown.

Brendan Barber, general secretary of the TUC, said the government was caving in to "special interest pleading by people who do not want to pay a fair share of tax".

"The government is facing a concerted campaign from some of the richest and most powerful people in Britain," Mr Barber said in a letter to Mr Darling.

"But ministers should not swallow the line that this move will hit business or the nation's prosperity."

John Cullinane, chairman of the Corporate Tax Committee for the Chartered Institute of Taxation told the BBC that the plans, if they become law, would probably not result in an exodus of the super-rich from the UK.

"I think for those people £30,000 is not a great deal. The damage is due to the sudden way it was done," he said.