The clampdown by Alistair Darling on tax exiles and wealthy non-domiciled residents is shot through with anomalies that could ruin London's reputation as the world's premier financial centre, tax experts claim.

They believe the Residence & Domicile Review will send City talent abroad to financial centres such as Geneva permanently, or see foreign professionals quit the country early. Within the expected crackdown on non-domiciled taxation, the new Chancellor ignited a bombshell with a shock move on residency and the 90-day rule on tax exiles.

The experts say the attack could see thousands of wealthy professionals such as hedge fund managers ending their weekly commute from Monaco or Gibraltar to London. Current residency rules allow tax exiles 183 days residency in any single year in the UK. Over a four-year period, they must not average more than 91 days a year.

Many leading financiers and businessmen, such as Peter Cruddas of CMC, the City's richest self-made man, live in Monaco at the weekend and commute by plane to London. Such tax exiles routinely arrive in London early on a Monday and leave late on a Wednesday. While they have effectively been able to do three days'work in the UK, the tax residency laws say that only takes up one day of their annual allowance.

However, a move to scrap such generous terms is buried in the notes put out by Revenue & Customs to accompany the Chancellor's Pre-Budget Report.

The Revenue said: "When deciding if an individual is resident in the UK for tax purposes, Revenue & Customs does not currently count the days they arrive in or depart from the UK. On or after 6 April 2008, days of arrival and departure will be counted as days of presence in the UK for residence test purposes."

This will come as a bombshell to legions of tax exiles, said Andrew Tailby-Faulkes, a tax partner at accountants Ernst & Young. "What many of these people will have to is decide whether they want to spend less time in the UK or pay more UK tax," he said. "For the hedge fund manager living in Monaco, it would appear more likely that he will take his business to alternative financial centres. The likes of Geneva will begin advertising almost immediately."

Meanwhile, tax partners say the Chancellor's clampdown on non-doms is likely to raise no revenue and force talent out of the country early. Darling revealed plans to tax non-doms - typically wealthy foreigners avoiding most UK taxes while being resident in the UK - at a flat rate of £30,000 a year after seven years of residency.

Cormac Marum of Grant Thornton said: "Darling has resisted Tory calls to impose a flat rate tax on the overseas income of all these non-domiciled individuals by introducing a £30,000 charge only if they have been over here for a full seven years. Most non-doms are here and gone within seven years, so I doubt that many them will be bothered with the new measure."

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