Darling faces US calls to drop £30,000 'non dom' tax

Chancellor Alistair Darling faced fresh criticism of his plan to tax "non dom" foreigners today after the United States warned its businessmen could be hit particularly hard by the move.

The Treasury is sticking by its proposal for a £30,000 annual levy, despite claims it could drain the City of talent.

With just weeks before the changes are set to come into force in April, the Americans are lobbying the Government to change its draft legislation.

They want the new levy to fall within a transatlantic treaty designed to avoid "double taxation". As the proposals stand, the levy cannot be offset against US tax and so American businessmen will be hit twice - once by the levy and again by the US taxman.

Richard LeBaron, chargé d'affaires for the US embassy, told the FT today: "The embassy has been consulting widely and hearing the concerns of American companies and taxpayers in the UK. We are communicating those concerns to HM Treasury and others in the UK government as part of our regular dialogue with them."

But the Treasury is resisting pressure to respond to the US concerns. An official said: "Whether the tax charge can be credited against tax paid in the US is a matter for the US authorities."

Details of exactly how the "non dom" tax is to work will not be finalised until the Budget on 12 March, just 18 working days before it comes into effect.