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‘Ghost dom’ tax loophole hampering efforts to stop sanctioned Russian money flowing into UK

Efforts to stop sanctioned Russian money flowing into the UK are being hampered by a tax loophole allowing the wealthy to withhold details of their assets or income from the authorities, The Independent can reveal.

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

Investigators from the UK’s newly formed corruption force – the National Crime Agency’s Kleptocracy Cell – are increasingly frustrated that they are struggling to target high profile Russians linked to the Kremlin who have been blacklisted during the ongoing war in Ukraine.

One official working on British sanctions policy told The Independent that the UK’s tax system – and specifically ‘ghost doms’ and non-doms – “severely limited” their ability to track and trace individuals’ income streams.

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

Labour decried the loophole as ‘a matter of national security’ which must be closed.

Around 70,000 individuals 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 at all as they claim to have no taxable UK income.

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

These ‘ghosts’ within the UK’s tax system are often some of the world’s richest individuals, wives, mistresses or children of criminals or senior foreign politicians, as well as entirely legitimate individuals such as wealthy retirees.

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

“This is extremely concerning – and not just because of how a few at the top are taking advantage while working people and businesses in Britain are hit with the biggest tax burden in 70 years,” she said.

“This is a matter of national security and must be urgently addressed to ensure it isn’t hampering our efforts to come down hard on dirty money linked to Russia, as Putin’s horrifying invasion of Ukraine continues.

“This is why Labour will abolish the outdated non-dom status.”

The Kleptocracy cell, linked with the UK’s National Economic Crime Centre and the former Department for International Development’s money laundering experts, 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 and of itself.

But while some wealthy individuals who are “quite normal” use the provision, others form a hidden “uber elite” in the system, according to one wealth adviser who has guided clients towards using the provision.

These are often individuals for whom the risk of later litigation, if their financial affairs become subject to investigation in the UK, is less troublesome than sharing details of their origin of their income to HMRC, the adviser said.

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

They said they had advised wealthy individuals including people with Russian, Belarussian, Kazakh and Iranian citizenship to use this status.

Xural.com

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