UK still plans to introduce rich foreigner levy - govt

By Matt Falloon

LONDON (Reuters) - The British government said on Tuesday it was ready to go ahead with a levy on wealthy foreigners who have so far been able to legally avoid paying UK tax, despite calls for the plans to be scrapped.

But the opposition Conservatives said the ruling Labour party -- on the back foot after party funding scandals and its handling of the Northern Rock bank crisis -- had been forced to water down the plans after an outcry from business groups.

Finance minister Alistair Darling announced last year a proposal to give non-domiciled individuals living in Britain the choice -- after seven years -- of either paying a 30,000 pounds levy or to fall under the UK tax system.

Pressure has grown on Darling to backtrack on the plan in his first budget next month given comments by trade minister Digby Jones that such a policy would drive away investment.

"The government's policy remains as it was set out in the pre-budget report," a Treasury spokesman told Reuters. "The final legislation will reflect the government's intentions that were set out."

In a letter of clarification to tax advisers, acting chairman of Revenue and Customs Dave Hartnett said the reforms would maintain "the competitiveness of the UK as a place to work and do business".

Hartnett said individuals who want to pay the 30,000 pound charge -- and continue only paying tax on foreign income when they bring it into Britain -- will not need to disclose any information on the source of those remittances.

He also said the tax changes will not be applied retrospectively and that discussions were ongoing as to how the levy could become creditable against U.S. tax.