Treasury takes a gamble with plans to make non-doms pay

But there are those who question their special treatment and the way in which many non-doms are tied to the private-equity industry, reaping vast rewards but paying little tax. There's a sense in which they have become something of an anomaly, encouraged for the supposed benefits they bring, in business and the presence of their entourages, but an embarrassment as the debate about the widening gap between rich and poor grows ever more voluble.

In response to the pressure and the lead of the Tories, the Government has turned on the non-doms, many of whom it counts among its friends. From April, following the proposed changes in last year's Pre-Budget Report, those who have lived in Britain for seven years will have to pay a £30,000 charge in order to remain here.

Obviously, for Abramovich and Mittal, such a sum is chickenfeed. Nevertheless, for the Government it's a gamble - there are 110,000 non-doms in Britain, according to the Treasury, of whom 23,000 will be affected. Of those 23,000, some are by no means wealthy workers who have chosen to settle in Britain. If they decided to pack their bags, the Government's move could backfire - suddenly, welcoming Britain, which has built so much of its recent success on the back of the ability of foreigners to come and do business here, would look very different.

Initial signs are encouraging. Nic Butt, a Kleinwort Benson private banker in its Jersey office, said: "It is early days but I have had only one client who's said, 'I'm going to turn my back on the UK.'"

The Treasury's own prediction is that around 3000 will quit Britain while a further 14,000 would opt to pay UK income tax under normal rules (if so, that would bring in an estimated extra £350 million in 2009-10).

But Andrew Rodger, director of wealth manager Stonehage, warns: "These are very substantial changes. It's not just people here who are considering an alternative tax jurisdiction. People who are thinking of coming here to set up a business may reconsider." Rodger adds that it is not only income tax that is affected but also capital gains on offshore investments. "The Treasury is talking about 3000 leaving but they don't make any estimate regarding [people who will leave because of] the CGT changes."

What's more, the Treasury floated some more radical ideas in a consultation paper last month. These include making non-doms who live here for 10 years pay £50,000 and ending non-dom status for those who live here for more than 17 years. A tougher idea still is a £30,000 fee on all non-doms, which would deter a lot of City workers who come to London on three and five-year stints before heading home.

A Treasury spokesman could offer no guidance about when the White Paper necessary to implement the rules will be published - even though there are less than three months to go before they are due to start. Some tax experts query whether the Government is in danger of running out of time.

Increasingly, it is clear that the smaller fish will be hit hardest. In theory, they might be better off paying UK income tax and giving up their non-dom status rather than coughing up £30,000.

The non-dom lobby argues the Government shouldn't penalise those who contribute much to the UK economy. For their part, ministers feel they must be seen to be acting. They maintain the £30,000 will not put off too many people. They also cling to the belief that many non-doms want to be here - for reasons that are not merely financial. Schools, good communications, geographical location, universal language, the presence of the City, family and friends, much-improved London quality of life - these are all factors they hope will work in their favour.

As the year progresses, whether they are right or wrong will become that much clearer.