Magazine article Management Today

The Rich Who Seek Refuge in Britain

Magazine article Management Today

The Rich Who Seek Refuge in Britain

Article excerpt

While most of us sit around groaning about high levels of taxation and worrying what Tony Blair might do to make matters worse, there is a group of individuals who enjoy a millionaire lifestyle, have income running into tens, if not hundreds, of millions of pounds a year and pay little or no tax.

How? They are foreign nationals, resident, but not domiciled, in the UK.' Under current rules, if you are not domiciled here, it is possible to structure your affairs so that you have a capital account and an income account,' explains Joyce Smith of solicitors Theodore Goddard. `If you only make drawings on the capital account you pay no income tax here at all.' Accordingly, many of Smith's clients who range from rock stars to Arab sheiks choose to be residen there because of the UK's advantages as a tax haven.

For superstars and mobile entrepreneurs, tax is a negotiable expense -- at worst an irritation but often more or less voluntary. Many probably pay more to their advisers in fees than they pay to the Revenue in tax. They are not alone in viewing the UK as a tax haven. `There are many individuals in the Sunday Times list of Britain's richest 500 people who are potentially tax exiles,' confirms George Yeandle, tax partner at Coopers & Lybrand.

Businessmen such as the Swedish brothers Hans and Gad Rausing who, as owners of the packaging group Tetra Laval, are between them estimated to be worth around 4 [pounds] billion, are potential beneficiaries of the Uk's benign tax regime -- though they are not prepared to discuss their affairs. They have been resident in the UK since the 1980s, having come here to escape the punitive rates of tax in Sweden. Gad has recently moved to Switzerland, though Hans continues to live on his farm in East Sussex. He could easily be living off capital, keeping most, if not all, of their income offshore.

Very few individuals born in Britain can take advantage of these tax breaks as, in order to do so, you need to be non-domiciled in the UK. Domicile is very hard to get rid of -- even if you have been non-resident for years. Those who benefit most are foreign nationals whose earnings are from investment income, or from some offshore activity which is itself carried out in a low corporate tax regime. …

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