Income tax ‘tipping point’ sparks exodus from UK
Hedge funds with $15bn in assets quit City of London for Switzerland
A stream of hedge fund managers and other financial services professionals are quitting the UK, following plans to raise top personal tax rates to 51%.
Lawyers estimate hedge funds managing close to $15bn (€10.4bn) have moved to Switzerland in the past year. David Butler, founder of professional services firm Kinetic Partners, said his company had advised 23 hedge funds on leaving the UK in the 15 months to April. A further 15 are close to quitting the UK, he said.
“In the past, managers would say they’d move some operations or dip their toe in the water. Now that’s changed,” Butler said.
Hedge fund Amplitude Capital took its $735m in assets under management to Switzerland at the start of this year. Odey Asset Management threatened to move in May. All the hedge funds that have left the UK for Switzerland are concerned about tighter European Union regulations, as well as crackdowns on tax in the US and UK.
From next April, individuals in the UK who earn more than £150,000 a year will pay tax at 51%, including national insurance. They will also be taxed heavily on pension payments.
Private equity manager Guy Hands, founder of Terra Firma, decided to quit London for Guernsey. A spokesman said: “He has no intention of returning in the foreseeable future.”
KKR’s European private equity operation has threatened to leave. Jon Moulton, founder of Alchemy, said he had no plans to quit his home in Kent, but confirmed that he owned a house in Guernsey and introduced Hands to his. Moulton added he “may very well one day retreat to an environment of lower taxes, no MEPs and where the most powerful posts in government are filled by election”.
Richard Jordan, a partner at law firm Thomas Eggar, said: “I would say that 40% of my work involves advising people on ways to leave the country. We have reached a tipping point, in terms of hostility to the UK tax system.”
One of his clients has just received a dividend from his business worth £2.5m. “He said to me, I’m going to be start being charged £1.3m on a payment like that. It’s time I thought about leaving,” Jordan said.
Recent research by accounting firm PwC suggested that married bankers earning £250,000 a year in the UK would retain less of their income after 51% tax than their counterparts in Paris, Frankfurt, Singapore and Dubai.
Matthew Feargrieve, London-based partner at offshore law firm Mourant du Feu & Jeune said the combination of higher taxes and prospective EU rule tightening was potent. The Swiss cantons of Zug and Zurich plan UK shows designed to tempt businesses from London.
Swiss cantons are prepared to agree ultra-low tax rates with people bringing business to the country. Even without discounts, Zug’s tax charge is just 14%.
Fiona Sheffield, a partner in the hedge funds tax practice at accountant Ernst & Young, said in June: “We have had most of the 250 hedge fund managers we provide services for talking about the pros and cons of leaving the UK for Switzerland.”
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