Lord Ashcroft non-domicile tax status under attack

The recent revelations of Lord Michael Ashcroft’s tax status, specifically his standing as a ‘non-dom’, has again thrust a politician into the spotlight, and created a wave of furore and questions in the process.

But who is Lord Michael Ashcroft? What, if anything, has he done wrong? What is a non-dom anyway?

Michael Ashcroft, according to his personal website, is a “businessman, philanthropist and politician” who was born in 1946 in the United Kingdom. He was educated in England and upon finishing his education he embarked on a journey to create himself a fabulous fortune. At 26 he formed his own company Michael A Ashcroft Associates, and acquired an ailing cleaning outfit for the meagre sum of one pound. Fast-forward three years later and the cleaning company finds a new owner, but this time Ashcroft pockets the tidy sum of £1.3 million. As he gained a strong foothold in the business world Ashcroft left the UK and made Belize, a place where he spent time as a child, his new base of operations.

His business interests in Belize soon amassed him a huge amount of money and in 1997 he sold his cleaning and security empire, ADT, and is thought to have gained £500m in the process. Then in 1998 he began his love affair with the Conservative party when then-leader, William Hague, appointed him as the Tory treasurer. He started ploughing money into the Tories and it is then that the question was raised, where was he domiciled England or Belize? How much tax was he really paying?

Then, in 2000, he was inducted into the House of Lords as a fully working peer. William Hague set out to clear up any confusion by stating that Ashcroft would now return to the UK, become a UK resident and subsequently pay many millions of pounds a year in taxes. However, this issue never really went away, and even though Ashcroft was essentially fuelling the Conservatives with huge donations, in 2004 the House of Lords expense register revealed that his main residence was indeed Belize. With questions coming thick and fast, Ashcroft, his people, and the Conservative Party all neglected to shed any light on the matter.

Soon, the Labour Party began to take notice. They claimed that Ashcroft, number 37 on the Sunday Times Rich List and worth an estimated £1.1 billion, was giving the Tories an unfair advantage. He was using his vast wealth as well as his business acumen to help the Tories win seats in marginal constituencies. The Labour party said that he is essentially buying votes for the Conservative party and that it was difficult to compete against such practices. More controversy followed Ashcroft, he also made large donations through the company Bearwood Corporate Services however an investigation is now under way so to whether these donations may have in fact breached electoral law. Baron Oakeshott, Liberal Democrat member, came out at this time and said “Democracy is in danger if Lord Ashcroft has been pouring millions into Conservative campaigns through an offshore pipeline from a Caribbean tax haven”.

Finally, on 1st March 2010 Ashcroft admitted that he is a non-dom- which means he is not domiciled in the UK and thus does not pay UK income tax on any of his international earnings, a highly lucrative status.

Non-doms are able to protect their wealth from UK income tax even if, like Ashcroft, they live in the UK. The main way of being a non-dom is by having non-dom parents. Through this one can claim that, even if one spends a bulk of time in the UK, the UK is not their permanent place of residence.

The high flyers, the jet setters and the super rich that traditionally establish themselves as non-doms do so through the aforementioned parental option, or show that they have strong business and personal connections to other countries, or establish that they plan to leave the UK at some point in the future. It is estimated that there are over 120,000 non-doms currently living in the UK. Non-doms spend a vast amount of money and contribute highly to the British economy, in 2007 they spent a whopping £17 billion.

Non-doms still have to pay tax on any income earned in the UK, but since they traditionally make their highest earnings on foreign shores, this is generally a tiny sum compared to the money they make worldwide.
Offshore Pro Group