Residency loophole 'costs UK £4bn'

THE government could raise up to £4 billion a year in tax revenues by clamping down on City high fliers taking advantage of residency loopholes, it has been claimed.

Thousands of workers exploit a quirk in the definition of UK tax residency by commuting to and from the UK and avoiding paying tax on profits and income earned here, according to the TUC. I

In a tax residence paper published today ahead of next Wednesday's spending review, the group claims that about 4bn a year could be raised by changing the rules to ensure that UK passport holders are considered by default to be UK taxpayers. It proposed an exception to allow UK subjects living in non-tax-haven countries to transfer their full tax status abroad.

The TUC pointed to the example of Monaco-based bankers who fly to London on Monday mornings and return to the principality by Thursday evenings in order to exploit the ordinary residence rule created when a person has been in the UK for 91 days in a year.

Brendan Barber, general-secretary of the TUC, said: "A big proportion work in the banking and finance sectors that drove the crash, but can now escape paying a proper contribution to putting right the damage they caused, while the rest of us face cuts in vital services and a VAT hike.

Introducing new passport-based tax residency rules, already operating successfully in the US, would simplify the law and close these tax loopholes, raising up to 4bn a year towards reducing the deficit."