It’s long been known as a magnet for the super rich to settle in, given that the UK tax authorities are also known to come to long term individual agreements with the filthy rich for tax purposes. And allowing the really wealthy to keep their assets and income in offshore tax havens, and not be taxed on those.
But thanks to growing stridency among the public and the media over the years, the British government has now moved to block this loophole that allowed the super rich get away almost scot free.
Unfortunately, it’s been done in a somewhat ham-handed manner that’s characterised the last few weeks of Gordon Brown’s government, and has ended up worrying a completely different target group - the not-super rich non-domiciled workers in the UK.
And while it’s difficult to estimate the impact, it’s likely to hit the hardest in the nerve centre of the UK economy, the City of London. Non-doms aren’t only the super-rich, or even your average high-net worth individual. It includes everyone from the Indian doctor and investment banker to the Polish plumber or French junior City worker.
The super-rich are, according to all preliminary reports, dismissing the new measures with a casual wave to their highly paid accountants who move their wealth around the globe on a constant basis.
In between setting up their next overseas offshore trust. The proposal says that anyone who’s spent 7 out of the previous 10 years in the UK should pay a flat rate of GBP 30,000 per annum, and give up a GBP 5000-odd personal allowance (equivalent to the standard deduction). It’s unlikely to make anyone who has minimum investments of over GBP 1.5 million outside the UK, and at least GBP 75,000 per annum, which is the Treasury’s estimate of the target group, even bother to shrug. As one wealth manager says, on grounds of anonymity, “I don’t know a single really rich individual who’s going to be even remotely bothered by having to pay GBP 30,000 a year. It’s small change.”
The peak rate of income tax in the UK is 40%, higher than India’s; and we’re talking incomes that nobody can even estimate here. Non-doms, as they are known, currently pay GBP 4 bn in UK tax on UK earnings, and the last official count puts the total number at 115,000, a figure that is hotly disputed. Of this, official figures put the number in the over GBP 1.5 m range at 15,000.
Meanwhile, talented foreign professionals working across a range of industries, including huge numbers of Indians in finance, healthcare and so on are frantically trying to rethink their financial planning and burning the wires to their accountants. But nobody - including the British government itself- seems to know exactly how many are affected, and that along with the real impact of the proposed measures is in the midst of an emerging controversy. Tax and finance professionals are yelling blue murder that this will drive talent out of UK, and send the men who man the money counters off to other financial centres such as Geneva. Not so, says Sharon Hardwick, CEO of the UK India Business Council.
“The proposals will affect only a very small number of people - those who spend a lot of time here but currently do not pay any tax - and are not targeted at anyone who lives here full time and pays UK income tax. So far as the many thousands of Indians who come to study, train and work here are concerned, the UK is open for business as usual,”Hardwick says.
Yogesh Shetty says, the London-based group managing director of Currencies Direct, one of Europe’s largest independent foreign exchange specialists, “The big advantage that the ‘domicile’ definition offers to people like me is that we can decide where we want to be taxed. I feel that calling UK a tax haven is incorrect,................................
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