The Government’s proposed reform of the non-domiciled tax regime will cost the Treasury an estimated £2 billion, according to a recent report.

Last month HM Revenue and Customs (HMRC) published draft legislation on the expected changes to the non-dom tax rules, following the Chancellor’s pledge to clampdown on overseas tax evaders in his 2007 Pre-Budget Report.

The draft document confirms that HMRC will levy a £30,000 charge on non-domiciles who have resided in the UK for more than seven of the past 10 years.

The Government hopes the reforms will remove flaws and close the loopholes that enable individuals using the remittance basis to avoid paying tax on foreign income and gains where it is due.

Whilst Alistair Darling has insisted that the changes to the tax rules will bring in additional revenue, the Society of Trust and Estate Practitioners claim the charge will actually cost the Treasury £2.1bn every year, as many residents may opt to leave the UK altogether.

The amendments to the non-dom tax rules are to be put before Parliament in the 2008 Finance Bill.