New research would appear to confirm that, while not quite the "exodus" popularly
characterized in the press, there is nevertheless a steady stream of wealthy
financiers, entrepreneurs and bankers leaving Britain as a result of the Labour
government's recent tax increases, namely the 50% tax rate, increases in National
Insurance contribution rates, and latterly, the bankers' bonus tax.
According to data analyzed by the Sunday Times' Philip Beresford, compiler
of that paper's annual "rich list," there has been a notable increase in the
numbers of wealthy people leaving the UK to live and work in the Channel Islands
and the Isle of Man in the past year. Using figures obtained from Companies
House, the UK's central companies registry, Beresford's research finds that
more than 6,700 directors of British companies are now registered as living
in Guernsey, Jersey or the Isle of Man – 500 more than at the same time last
year. The British Virgin Islands has also become a significant beneficiary of
the outflow of British businessmen, with 615 UK company directors now based
in the Caribbean jurisdiction, 18% more than were registered there last year.
Francesca Lagerberg, Head of Tax at Grant Thornton, suggests that, combined
with Chancellor Alistair Darling's determination to crack down hard on tax avoidance
as well as tax evasion, it is not surprising that the steadily rising tax burden
on the well off is causing many to consider their options, with some already
having taken the decision to leave the country for more benevolent tax shores.
"In conjunction with the 50% tax rate, the 1% increase in National Insurance
from 6 April 2011 and the removal of higher rate pension relief, those wealthy
individuals who are internationally mobile are now likely to start booking their
flights out of the UK," she notes. "If the aim is to frighten high
earners then the government has succeeded."
Meanwhile, Guernsey-based Clydesdale Bank International believes that the outflow
of the wealthy from the UK could become an exodus when the reality of the 50%
tax rate is more widely understood.
On the face of it, the 50% tax will only apply to annual income of GBP150,000
or more (currently taxed at 40%). But Clydesdale warns that when taxable benefits
such as company cars or employee loans are factored in, the 50% rate could affect
taxpayers with a salary of GBP90,000.
“We have already started to see and hear of intermediaries as well as
individuals looking to transfer capital to institutions, or work with structures
here in Guernsey," said James Blower, managing director of Clydesdale Bank
International. “The knowledge that people earning less than the GBP150,000
threshold may also be liable for the full 50% tax rate could lead to even further
enquiries. It may ultimately also mean a wider range of earners doing business
in Guernsey."
Income that will be subject to the 50% tax can come from various sources, such
as salary, taxable profit from a trade, state or private pension, bank interest,
share dividends, rental profit, and redundancy payments.
In an attempt to tighten the screws further on wealthy taxpayers, Darling also
announced in last week's pre-budget report (PBR) plans to further restrict pension
tax relief for those earning more than GBP150,000 per year. Under these proposals,
pension contributions made by the employer will now count towards the definition
of income for the purposes of the GBP150,000 threshold. Prior to the PBR announcement,
someone earning up to GBP150,000 and receiving an employer’s pension contribution
up to his full salary was not caught by the restrictions.
The Chancellor also introduced a floor such that anyone earning a salary under
GBP130,000 before the inclusion of employer pension contributions will not have
their relief restricted.
“This apparently technical change effectively halves the starting point
for the restriction of tax relief on pension contributions," Nigel May,
Tax Principal at MacIntyre Hudson observed. "Apart from the political attraction
of soaking the rich, it is difficult to see the rationale for this further tightening
of the net."
“Yet again through an apparently technical measure the Chancellor has
reduced the definition of how much you need to earn to be worthy of Labour’s
tax assault on the wealthy," he added.
TAX-NEWS.COM
Free Tax-News Feed