Super rich hit out at tax burden as non-dom and stamp duty taxes rise
23 Jan 2015
The super rich have warned they will leave the UK if tax rates continue to rise, according to a survey of ultra high net worth (UHNW) individuals who are clients of wealth advisory firm, Virtual Family Office, a group representing people with net wealth in excess of £5m
23 Jan 2015
All of the 239 super rich members of the Virtual Family Office said they would reconsider their domicile if taxes continue to rise. One member said ‘If taxes get too high, I will leave the UK'. When France raised its taxes on the rich, they left, as a result the French economy stalled. The same could happen in the UK although the French are abolishing the 75% tax rate next month, reverting to a progressive tax rate which peaks at 45%.
Caroline Garnham CEO of the Virtual Family Office, former leading private client lawyer, said: 'Thanks to the endeavours of Gordon Brown when Chancellor we now have the most sophisticated and complicated tax legislation in the world. Gone are the days when the rich could engage a top tax adviser and avoid paying tax, while remaining a resident of the UK'.
The wealthy make a significant contribution to HMRC which benefits everyone, said Garnham, but 'governments should be careful what they promise voters. Appealing to the emotion of envy is likely to lead to less rather than more revenue.'
The majority (92%) said that inheritance tax (IHT) was too high and would make lifetime gifts and donations to charity to avoid it.
The recent reform of stamp duty land tax (SDLT) was another negative for the richest in society; 84% said the increases above £2m would affect their decision whether they would buy or sell a property. Already property rises have slowed from 8.8% to 0.8% and this is expected to filter through into the amount of stamp duty raised.
In 2013 the London boroughs of Westminster and Chelsea raised £708m, more than northern England, Wales, Scotland and Northern Ireland put together.
Only 58% thought capital gains tax (CGT) rate was too high, 42% said it would not affect their decision to take profits.
With regard to the taxation of non doms, 93% said the tax legislation should be changed to encourage them to spend more time in the UK rather than less. The annual fee goes up the longer they stay in the UK. These rules encourage the super-rich to leave the country. The rules on non-doms are currently out for consultation with a view to introducing a minimum claim period for the tax remittance base charge for non-doms at three years.
Currently 104 billionaires live in the UK and spend an estimated £16bn every year. Not all this expenditure attracts VAT; property, antiques and investments are exempt, but the businesses which benefit from this expenditure will be paying corporation tax, and the people they employ; PAYE and NICs.
The super rich survey comes out the same week as Oxfam released a report ahead of the World Economic Forum in Davos showing that the combined wealth of the richest 1% will overtake that of the other 99% of people next year unless the current trend of rising inequality is checked.
The research paper, Wealth: Having it all and wanting more, shows that the richest 1% have seen their share of global wealth increase from 44 per cent in 2009 to 48 per cent in 2014 and at this rate will be more than 50% in 2016. Members of this global elite had an average wealth of $2.7m (£1.8m) per adult in 2014 of liquid assets.
Of the remaining 52% of global wealth, almost all (46%) is owned by the rest of the richest fifth of the world's population. The other 80% share just 5.5% and had an average wealth of $3,851 (£2,567) per adult, equivalent to 1/700th of the average wealth of the 1%.
The Oxfam report is available here http://policy-practice.oxfam.org.uk/publications/wealth-having-it-all-and-wanting-more-338125