Proposed changes to the taxing of wealthy foreign nationals in the UK could benefit Ireland by prompting senior City of London executives to consider a move to the Republic, according to an Irish tax expert. Simon Carswell, Finance Correspondent, reports.

Foreign nationals living in the UK currently claim "non-domiciled status" and avoid paying tax on overseas earnings or offshore assets. However, under draft proposals so-called "non-doms" would have to pay an annual charge of £30,000 (€40,200) if they have lived in the UK for more than seven years.

KPMG tax partner John Bradley said if the UK proposals become law extremely wealthy foreigners living in the UK may not leave for the sake of a £30,000 saving, but senior executives could consider a move to the Republic to protect their overseas investment income. They could, for example, move to avoid paying tax on interest earned on after-tax bonuses deposited offshore.

"I am sure that there will be people who will look to Ireland now, but I am not sure it will draw the mega-wealthy out of the UK to Ireland. It might affect guys lower down on the scale."

The proposals have raised concerns in the financial services sector in London that the changes may lead to a flood of "non-doms" out of the UK.

The UK Treasury is trying to create a system so that wealthy "non-doms" contribute something to the tax system.

One senior Irish businessman working in London said the proposals created a significant opportunity to attract senior foreign executives to the Republic, particularly to the IFSC in Dublin.

Foreigners living in the Republic and the UK do not pay tax on investment income earned overseas, and under a change introduced in this year's Finance Bill any income earned on investments in the UK will be regarded as overseas investment income for foreigners in the Republic.

However, Mr Bradley pointed out that any capital gains made in the UK would not be regarded as overseas earnings, and would be taxed in the Republic at the capital gains tax rate of 20 per cent.

UK trade and investment minister Digby Jones, a former director general of the Confederation of British Industry, has broken ranks with the British government and warned that plans on the crackdown on non-domiciled foreigners living in the UK would threaten London's role as a world financial centre.

In an interview with the Financial Timesyesterday, he said the changes made it harder to sell the UK as a destination for skilled foreign workers and inward investment. "I can give you five reasons as to why you should invest in Britain before you go and invest anywhere else in Europe. But maybe there were seven and now there are five."