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London's rich hedge fund managers and private equity executives will quit the UK in droves ahead of the 50% top tax rate next spring.
That is the news from City tax advisers who say they have never been so busy consulting with professionals on how to leave the UK and avoid their tax bill from Revenue & Customs.
Chancellor Alistair Darling has announced that from next April people paid more than £150,000 a year will pay tax at 50%. But the loss of allowances in reality takes that top tax rate to more than 60% for some.
It makes Britain the highest taxing nation in Europe after the traditionally big income takers of Denmark, Sweden and the Netherlands.
The advent of the 50% tax rate appears to be the final straw for many hedge funds and other money firms who are being actively lobbied by the Swiss authorities to decamp to Zug, Zurich or Geneva.
They are being promised that in Switzerland they can hide from increasing European Union regulation or the intervention of watchdog agencies like Britain's Financial Services Authority.
Richard Jordan a partner at law firm Thomas Eggar told Financial News: “Around 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.” Financial News estimates that hedge funds managing nearly £10 billion of assets have moved to the tax haven of Switzerland in the past year.
Jordan said the sort of people contacting him are in the same boat as the recent client who complained that the £2.5 million dividend that he is to get paid by his firm will — next year — attract a tax bill of £1.3 million.
“In the past, [hedge fund] managers would say they'd move some operations or dip their toe in the water,” said David Butler of hedge fund adviser Kinetic Partners. “Now that has changed.”
Fiona Sheffield, a partner in the hedge fund taxation practice at accountant Ernst & Young said: “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.”
City big hitters have already started quitting.
Guy Hands, one of the biggest names in UK private equity and head Terra Firma which owns EMI, has already announced he has left to set up home in Guernsey with no intention of returning to Britain any time soon.
Another leading private equity face — John Moulton — has said he could “retreat to an environment of lower taxes, no MEPs and where the most powerful posts in government are filled by election.”
Reader views (41)
I can afford to be very bored in Switzerland as I have my fine house and can afford to fly or drive anywhere & take advantage of the low prices. I am not a banker, but a good seller. Left the UK in Dec. 1980
- John Clifford, luzern, Switzerland
FACTS: I am relocating my hedge fund to switzerland
FACTS: My 8 guys are all coming along
FACTS: I puting my house up for sale, so are 3 of my guys.
FACTS: My London lawyers, accountans, recruiting agencies, car dealer, barber, gym.... are not going to see my business anymore - nor the one of my guys.
FACTS: mr. Darling won't see my taxes anymore. Sorry but you guys will have to share the bill without counting us is.
FACTS: with the money i'll be saving, I'll consider coming for the weekend and have dinner at Nobu, if I am too bored of going skiing yet another weekend. (I love "boring" Switzerland)
Now try to see the impact on your economy, on your house prices, on your disposable income after hundreds like me and my fund and my busines have gone.
I have financed too many lazy arses for too long. And we are always blamed for all the problems.
Enough. Good luck with bill. Cheers.
- Jack D.P., London - not for much longer...
I find this thread humorous in that just 2-3 years ago the chattering classes were saying how NY had lost its finance crown to up and coming places like London and Hong Kong. Now it must be CH. Listen, I'm in the business and have met with quants & money managers in Zurich and Geneva, and the level of quality is nowhere near what it is in NY, Boston, SF, LA, and yes, London. CH is not a viable enterprise without its ethically-challenged private banking industry and that veneer is peeling of quickly. So London, I wouldn't worry. Hedgies will be back.
- Hill, San Francisco, USA
Middle class Monty-not usre your post is serious/is a wind up? You've met a few hedge fund managers but you don't like them, you want them to leave, but you also want higher public spending. You do understand that real money is generated by those fund managers, who entice money in from other countries, tehrefore importing wealth. And you do understand that public spending comes from taxes right? SO if people who are leaving bring in large amounts of tax, you do understand wht will happen next?
Oh that's ight, you'll probably want money to be created out of thin air, because that's how 'real wealth' is created isn't it?
- Tim, London UK
Much as I hate to say this, but it is vital that these people stay in the country. It is the financial services industry, including hedge funds, and all those loathsome bankers and their parent companies, who have provided huge amounts of tax to go into the coffers of what is now bankrupt Britain. It is the government's fault for wasting the majority of it. And it is the financial service industry's fault for betting wildly and using the taxes that they themselves paid in to get themselves bailed out (and more besides) by the governemnt, most likely in the full knowledge that they were too important to fail. But they have to stay, they are the powerhouse of the economy, because they are one of the few productive industries we have left. Wealth is generated by making something that people outside of your country want to buy, so new money comes in. We have little heavy industry-the finacial sector is where this occurs for us. Start persecuting the people who run it and we've shot ourselves in the foot. Again.
- Tim, London UK
Why wouldnt you move? Taxes are considerably lower in Switzerland. Their trains run on time, all their public services are exceptional. The UK is a great place but wealth creators are being pushed away. Its as simple as that.
- Justin Etzin, New York
To all those brits who believe UK didnt benefit from reach being in UK think of why your houses doubled in price in less than 10 years and why you pay tax on that capital gain which is nowhere close to tax rates on income. Your tax system is designed for lazy people who sit on their asses and do nothing. Best you can do is collect social benefits.
- Alex, Monte Carlo
Good luck to the banker bloke who has upped sticks and left the best city in the world for self imposed exile on the wonderfully boring/tedious island of guernsey.As the saying goes 'when a man is tired of London he is tired of life'.I wonder where he intends to go once the EU closes the channel islands tax havens.
- Leonard Lillywhites, N.London
So we are going to lose a whole bunch of people who wreck economies and contribute nothing to the economic job generating economy? The same people who take hard earned share values and destroy them by gambling.
Close the door behind you - other economies manage to survive without them - why not ours ?
- Graham, Fleet, Hampshire
Bye, don't come back - you tricky parasites.
- William Ear, Waltham Cross
Well they can go there but they won't like it. I work in Germany and I often go to Switzerland. Zurich is like most German speaking places with the possible exception of Berlin. That's boring, parochial, unfriendly towards strangers and foreigners, with freezing winters and awful food. So what if the trains are always on time!
- Mike, Frankfurt Germany
I lived in Zug for 15 years, it is the definition of boring. English speaking schools are full of expat Americans and all that goes with that! Many expat marriages fail.
- Gilbert, herts
The hike in tax rates for the rich still leave the UK comparable to the other major economies of Germany and France once you take into account NI equivalents, 'solidarity' and 'wealth' taxes, and the French treatment of personal CG revenues as income. They just have more of a sense of national pride in the idea that those that generate the most wealth help support the less well off - hence these 'solidarity' taxes.
And as for Frank in Copenhagen suggesting it is mainly the City and Oil that generates the revenues; the City, yes in no small part but not via the group of people we are discussing; and Oil??? I'm afraid the big revenues from that funded the Thatcher/Lawson boom of the 80's and Petroleum Revenue Tax account for a staggering £1.7bn or >1% in the projected 2008/9 Budget figures.
Go have a cup of tea and calm down.
- Papalarge, London
For the first nine years of Mrs Thatcher's government the highest rate of income tax was 60%. If going back to 50% is going to lose the UK exchequer money, why isn't David Cameron promising to reverse this increase - after all it wouldn't cost anything to do if the argument put forward in this story is to be believed.
- Tonyb, Melbourne
Tonyb - perhaps you should be reminded that the top slice income tax bracket was reduced from 83% to 60% and eventually to 40% (as public finances allowed) by the Tories following the insanity of the last Labour administration with the IMF coming in and ultimately ending as we know in the winter of discontent.
It is well known that tax receipts go up in aggregate when taxes are low, simple and not worth avoiding. A bunch of tax accountants also become redundant - saving vast sums of wasteful expenditure plus HMRC would be 10% of its current size......saving billions........
Taxes should not start for at least the first £10k of earnings - why should the state take away with one hand and give back with the other hand other than to cynically tie people to the state and so get themselves votes...
Many people left the UK in the seventies - because of the brainless stupidity of the unions and Labour - avoiding the politics of envy and insanely high taxes. 50% - one half of what you earn is not a fair rate .......and we haven't even factored in the duplicitous NIC rates as well.....
- The Droid, London
When will people stop talking about 50% top rate of tax. The realiy tis 10% higher than that. Every employer pays over 10% of an employee's wage to the treasury as 'National Insurance' just the same as income tax. Then there is the extra 1% of NI that G Brown brought in. I would love someone to explain to the difference between NI and Income Tax. Even ordinary earners pay this extra levy but no-one wants to talk about it!
- Antoine Desmoines, London, UK
A depressingly familiar and predictable consequence of the kind of stupid Labour policies that I've had the misfortune to watch being applied at least 3 times over since 1967.
Anyone who thinks hedgies won't move to Switzerland because it's boring needs their head examined. It's a small country in the middle of Europe. Hedgies can afford to fly or drive out & spend their weekends anywhere they like (including London), and with the tax they'll save, they can afford it. Plus, the skiing really is great...
- Henrydz, London
About time - this is what all the '97 Labour voters have been waiting for! Let the hedge fund managers leave if they want - the ones I've met haven't impressed me in the slightest. There are a lot of ways to improve life in the UK. Less hedge fund managers, and more funding for public services are two near the top of my list. Rejoice!
- Middle_Class_Monty, Oxford
MDJ...
"I hadn't realised that so many people in Swindon earn more than £150k p.a. For most of us, Stephen, the chance would be a fine thing!"
I don't but I didn't realise I had to earn £150K to have a point of view. Where I agree with you is that everyone should be able to earn as much as they can justify in the real market.
Where I disagree with you is that, like it or not, in the real world, no matter what goods/services you produce you need a strong banking system to support these. We live in a Global economy and we have to compete with every other Country. The myth of easy money in the city is exactly that. The ruthless efficiency of the city ensures that only those who constantly perform stay in employment.
Should the pay and bonuses be less? perhaps.. but does UK plc benefit from this? Absolutely! It is a short sighted and inept approach to simply tax these people until they leave.
The biggest problem UK plc faces is a lack of ambition caused by overwhelming tax and bureacracy. History shows us that markets correct themselves, bureacracies do not!
- Stephen, Swindon
This Labour Government 'they just don't get it'!
- Brian, Bristol
Their wealth & ill gotten gains to be given to the poor & desperately hard working ordinary people of the country. They create no wealth but are parasites on society & deserve to be treated as such.
- Frank, UK
Matthew John and others - I am afraid you are wrong. Much of the money that the fund managers run is outside the UK and the fees they generate are a very real source of income for the UK Government. For the last 20 or so years the UK has been financed by two income streams - North Sea Oil and the City. Taxes form these two sectors financed and subsidised the rest of the economy. London was able to attract large nunmbers of very well paid indivudals to London to work in the city - all of whom paid into the HM Gov. The rest of Europe has been very jealous of the City and now - yes alrge numbers of people are going (with their money)to Switzerland, and we will all be the worse of - especiallya as North Sea Oil is running out.
- Very Very Angry At Paying Tax For Mp'S Expeses, Home Counties
I doubt they paid tax in this countryt most dont thats why it is so easy to leave
- Duncan, Kent
So what if hedge fund managers quit the UK. The industry is hardly labour intensive. Participants are often non-British. Their contribution to the Exchequer is negligible - thanks NULab for the loopholes.
Their fund performance is suspect. Once the poor performers are conveniently closed down and drop out of performance surveys they do little better than conventional funds ie poorly. They have simply contrived to get their hands in the 'cookie jar' of other people's money (our pensions).Of course, they pay themselves absurd amounts of money for their services because they can. Good riddance.
- Paul, Kent
This is PA exercise by the rich to get some sympathy or some concessions so they will stay here. Think they want to leave London - like hell they do! Once the Swiss pay the USA all the money it owes for being an illegal tax haven it will be skint and its taxes will go up to around 60%.
- Mc, London
With tax revenues already 20 pct down, Government borrowing getting higher by the minute, what a fiasco? With the unemployent figures increasing who is left to be taxed ?
- Tonyjohnson, Hythe Kent
The only thing left [no pun] is for the IMF to turn up and the UK will have come full circle 1979-2009, the same old, same old, same old.. Nu/Old Labour. Bloody marvellous. The ordinary salaryman will be the person picking up the tab again but this time he won't be able to retire... no pension, all smashed by the Scottish cabal.
- James Macleod Ritchie, Oyster Bay Cove
This is now great loss. Fund managers and investors do not create any wealth for the country. its not possible for any investor to consistently beat 'the market'. They are just rewarded with huge bonuses when the market goes up, but have no risk when it goes down. This is merely an incentive to take excessive risks with other peoples money and endanger the economy.
Real investment in science and technology through teaching, universities and high-tech science parks creates wealth. This should be the governments focus. Becoming a tax haven for the super rich is pointless.
- Matthew John, london
Browns lust for tax is simply disgusting.
The man needs removing now before we are all in the gutter.
- David Cuff, Manchester
'As usual, they ruin the middle class and find surprise, surprise the middle class leave'
I hadn't realised that so many people in Swindon earn more than £150k p.a. For most of us, Stephen, the chance would be a fine thing!
The people leaving - if they really are- are people who have no loyalty to this country: they may make a lot of money, but most of it has come out of other people's pockets: the City transfers wealth, but does little to create it. These are the people who have shafted the country over and over again. Good riddance to them ,and let us learn again that there's no free lunch,and get down to working our way out of debt.
- Mdj E10, london uk
Can't see too many people wanting to relocate to Switzerland - nice to visit but surely one of the most boring and miserable places on earth to live in.
- Mr E, London
If you needed proof that this Government has lost the plot then this is it. Over tax people and they will leave. The New Labour communist experiment is almost over. As usual, they ruin the middle class and find surprise, surprise the middle class leave. Leaving their hapless non-productive voters to the realisation that their benefits may no longer be a right and entitlement, as the money has to come from somewhere to pay these state handouts.
Employing more civil servants does not add to the nations wealth and ruining the economy by taking massive loans means a new generation of voters will be saddled with debt for many years to come to make this Government "look good" by throwing money at the recession that this Government never saved in the good years.
Game over Goerdon Brown, the worst Chancellor and Prime Minister this Country ever had.
- Stephen, Swindon
John, have you tried the food in Zermatt, superb. Cold winters give great skiing at the weekend with clear blue skies. The Swiss must be rubbing their hands at all the extra tax they'll get.
Well done Alistair, great own goal for old labour class reasons of jealousy. Still you won't be there for long.
- Stephen C, London
@John: Yes, winters in Switzerland are colder, but that is necessary for good skiing. Taxes are considerably lower, so is the crime rate. Trains run on time, public services are brilliant and schools free and safe. In short, the country works. What national cohesion in UK you're talking about? Everything is falling apart.
- Expat, Zurich
If they want to leave it's up to them. Personally I'd rather pay 50% here than live in Switzerland. I spent three years in Zurich. Narrow minded, petty, racist, terrible food (unless you like salt), utterly miserable in the winter and nothing to do other than go to the mountains at the weekends(assuming it's not blowing 50 mph at 2000m). Perhaps the French and Italian parts are better but I have no desire to find out.
Any hedgies will salivate at paying 25% income tax in Zug but given what a dead hole it is I'd say that was expensive.
- Investment Banker, London
For the first nine years of Mrs Thatcher's government the highest rate of income tax was 60%. If going back to 50% is going to lose the UK exchequer money, why isn't David Cameron promising to reverse this increase - after all it wouldn't cost anything to do if the argument put forward in this story is to be believed.
- Tonyb, Melbourne, Australia
@John
Great Britain is currently being held to ransom by the U.S over Gaddaffi. The EU dictates most of our fiscal and national policy and you've blatantly never been to Switzerland. What's it like there in the 1960s ? - listen out for 'The Beatles' great new band.
- Hansel, London
Excellent. Once again, the rich will leave because there is no incentive for them to stay and keep the economy rotating, and guess who will pick up the tab? Answer: The law abiding tax paying normal citizens, so folks, what this means is that the rate for tax will increase at the lower level - mark my words. Thanks Alistair, you really thought this one through didn't you. Or, did you... mmm
- Richie, London
It 1978 all over again.
- Andrew Nicholls, Ely ,England
Great Britain will not be to ransom by anyone.
The British Government determine our rates of taxation, no one else.
As to Swizterland, cold winters, poor food,lack of national cohesion.
- John, Westminster
The two biggest income earners for the Chancellor are oil and the city. No other sector comes near these two.
They also spend a lot of money locally so other businesses will lose out. Foreign companies will see the UK as unfriendly and decide to shift their corporate European offices to more tax friendly locations with better infrastructure and lower levels of crime.
- Frank, Copenhagen, Denmark
Surely it's better to get some tax, not just through direct code but through the purchase (VAT) and property tax than lose it all to another country.
This government just wanted to win a few votes with yet another 'eat the rich' policy which will ultimately have a negative affect on the Treasury and the poor.
- Hansel, London
