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Non-doms who have left the UK are quitting their exclusive private members’ clubs to prevent HM Revenue & Customs thinking they are still resident, and therefore have to pay tax.
Lawyers have been advising wealthy clients that the tax authority can use membership of a club such as Annabel’s, Soho House or 5 Hertford Street as evidence they still have strong ties to the UK. Annabel’s has an annual membership fee of £3,750 on top of a £1,850 joining fee.
Many wealthy individuals, such as steel billionaire Lakshmi Mittal, have either left the UK or are planning to because of the abolition of the non-dom regime. This allowed British residents who declared their permanent home as being overseas to avoid paying UK tax on foreign income and gains.
A former non-dom who left the country because of the regime’s abolition said she had quit the Arts Club and 5 Hertford Street, both in London’s Mayfair, on her lawyer’s advice. “They don’t even like you to be a member of a gym, so anything that shows commitment to something [in the UK], even if it’s not expensive, is taken . . . as evidence of your desire to actually be here.” She is now dividing her time mainly between Greece and Switzerland.
Philip Palumbo, managing director of The Walbrook Club in the City of London, said some of his non-dom members had quit when they had left the country: “They have cited membership as evidence of ties to this country, and so they’ve had to resign from us.”
Palumbo added that he thought “certain clubs in the West End will struggle with the exodus of non-doms” because of their internationally mobile clientele.
Other private members’ clubs have begun to think about how they can stop non-doms from quitting entirely. Because in some cases HMRC imposes a limit of 90 days a year on how long someone can spend in the UK before they are considered tax-resident, one club has raised the prospect of offering short-term memberships for specific durations including 90 days, according to a person close to the discussions.
Another club has seen a surge in interest among members looking to switch from UK to overseas memberships, a person familiar with the situation said.
In her October Budget, chancellor Rachel Reeves confirmed the abolition of the non-dom regime as of April 6, proposed by her predecessor Jeremy Hunt. Those who have decided to stay will see their worldwide assets potentially subjected to UK inheritance tax at 40 per cent.
Guidance from HMRC for its Statutory Residence Test, which aims to determine whether a person is resident in Britain and thus liable for UK taxes, lists a number of factors to be taken into account. These include a spouse or children in the UK, local utility bills and “membership of clubs, for example, sports, health or social clubs”.
Camilla Wallace, senior partner at law firm Wedlake Bell, confirmed that she had advised clients to relinquish club memberships when leaving the UK.
Wallace also queried what it would mean, for UK tax purposes, if a former non-dom belonged to an international club that offered a “reciprocal” club membership in London.
