Efforts to prevent the flow of sanctioned Russian money into the UK are hampered by a tax loophole that allows the wealthy to withhold details of their assets or income from authorities, The Independent can reveal.

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

Investigators from the UK’s new anti-corruption force – the National Crime Agency’s Kleptocracy cell – are growing increasingly frustrated with struggling to target high-profile Russians linked to the Kremlin who have been listed black during the war in Ukraine.

An official working on UK sanctions policy said The Independent that the UK tax system, and more specifically the ‘ghost doms’ and non-doms, ‘has severely limited’ their ability to track and trace the income streams of individuals.

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

Labor said the loophole should be closed as “a matter of national security”.

Some 70,000 people 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 as they claim to have no UK taxable income.

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

These “ghosts” within the UK tax system are often some of the richest people in the world, wives, mistresses or children of criminals or high-ranking foreign politicians, as well as quite legitimate people such as wealthy pensioners.

The scrutiny of Britain’s tax regime has intensified in recent weeks after The Independent revealed that Akshata Murty, the wife of Rishi Sunak, has a non-domiciled status. Ms Murthy, an Indian citizen whose family business is estimated to be worth around £3.5billion, continued to use non-dom status after her husband became chancellor in 2020.

It was revealed days later that Sajid Javid, currently health secretary, had held controversial non-dom status for six years while working as a banker. Mr Javid also used an offshore trust while working as a key aide to George Osborne in 201, which reduced his personal tax burden.

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

“It’s hugely concerning – and not just because of how the few at the top are profiting as British workers and businesses are hit with the biggest tax burden in 70 years,” she said. . The Independent.

“This is a matter of national security that needs to be addressed urgently to ensure it does not hamper our efforts to crack down hard on dirty money linked to Russia, as the horrific invasion of Ukraine by Putin continues.”

Labor has promised to abolish the tax status of non-doms, which they have called “outdated”.

The Kleptocracy cell, linked to the UK’s National Economic Crime Center and former money laundering experts from the Department for International Development, was set up earlier this year.

“Ghost doms” rely on Section 809E of the 2008 finance law not substantiate any tax claim and use of the status is not an indication of wrongdoing in itself.

But while some wealthy people who are “completely normal” use the provision, others are a hidden “super elite” in the system, according to a wealth adviser who has guided clients to use the provision.

These are often people for whom the risk of further litigation, if their financial affairs are investigated in the UK, is less inconvenient than sharing details of the source of their income with HMRC. , said the adviser.

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

They said they advised wealthy people, including people with Russian, Belarusian, Kazakh and Iranian nationality, to use the status.

The type of individuals who could use such mechanisms, and where they could intersect with sanctions policy, could include figures such as Polina Kovaleva, the alleged daughter-in-law of Russian Foreign Minister Sergei Lavrov, the report said. even advise. The UK has been criticized for its delay in sanctioning Ms Kovaleva earlier this year.

Dan Neidle, founder of Tax Policy Associates, a nonprofit tax policy consultancy, said there’s a broader issue of transparency around the affairs of those who use nondom status.

“Non-doms are a black hole. HMRC has no information on their returns on their income or global assets.”

Individuals can become non-doms simply, by using a separate ‘clean’ offshore account to fund their UK expenses, and when they transfer money from that offshore account to their UK bank, there is no will have no UK tax consequences.

This is a widely adopted and entirely legitimate tax planning technique, noted experts including Mr. Neidle.

The government has been criticized for delays in implementing a register of offshore owners of UK properties, which experts say has a host of shortcomings.

The wealth of ghost domes often flows through countries like Switzerland or offshore tax havens that allow banking secrecy to conceal the sources of their wealth.

With little or no knowledge of their income, it is difficult to use the UK’s recently developed anti-money laundering tools, such as unexplained wealth orders, to target their financial affairs, said a source.

“We are guided by the data we hold about individuals, in combination with intelligence collected at home and abroad. Too often we don’t see the implications of data we don’t have. They are still so often the black holes, the ghosts, in our tax system,” one official said.

The National Crime Agency declined to comment.

The Treasury has not denied that officials have raised concerns about tax provisions such as non-dom and “ghost dom” status in the fight to sanction individuals linked to Russia or other enemies of Russia. the British state.

A UK government spokesperson said: ‘Non-doms play an important role in funding our public services through their tax contributions – worth over £6billion a year.

“Tackling those who deprive public services of vital funding remains a crucial part of HMRC’s work and they have the appropriate powers, including fines and penalties, for those found to be dishonest in their tax returns. self evaluation.

They added: “Where sanctions evasion is taking place, the National Crime Agency will investigate, and the government recently announced a new ‘kleptocracy cell’ to target sanctions evasion and the assets of corrupt elites. hidden in the UK”.