Treasury in row over £35k non-dom bill

The Treasury arranged to pay £35,000 for a legal opinion suggesting non-domiciles could claim the new tax charge they face against their US tax bills.

The revelation of the fee agreed with Skadden, Arps, Slate, Meagher and Flom ­ disclosed in a Freedom of Information Act request by Accountancy Age ­ was criticised by the opposition this week, with the Tories saying that it would be better to simply have agreement from the US government on the issue.

US non-doms have been angered by the government’s new £30,000 annual fee, amid fears that they would have to pay it in the UK and not be able to claim the payment back against their US tax bills, as they can with other taxes.

The Treasury commissioned Skadden’s 15-page opinion on whether the charge could be claimed against US tax after failing to get an agreement from US officials, and issued it with this year’s Budget.

‘The contract between Skadden Arps and HM Treasury was valued at $70,000 (£35,000) at the time it was let,’ the FOI response says.

The contract was not tendered, the Treasury added. ‘As the work was urgent only Skadden Arps were approached. In these circumstances, a full tender exercise would have caused significant delay.’
An official ‘took soundings’ in Washington on who to hire.

‘A Skadden Arps partner was put forward as distinctly the best bet,’ the unnamed official wrote, before securing the agreement of the Treasury’s permanent secretary.

Tory MP and shadow financial secretary to the Treasury Mark Hoban said: ‘It would be better if we had agreement from the IRS that the charge would be creditable.’

Given Skadden’s opinion suggested that an authoritative IRS opinion would follow in due course, Hoban said: ‘[We’re] not much further forward despite having spent £35,000 of taxpayers’ money.’

Hoban also criticised the tender process: ‘The issue has been bubbling on since October. I would have thought the Treasury had plenty of time to put it out to tender.’

Tax lawyers said that most contracts were put out for tender to at least two or three law firms. Skadden declined to comment.