The complex tax lives of our foreign millionaires

Desperate to plug the UK's deficit, the Treasury is clamping down on loopholes allowing the wealthy to avoid duty

For the multimillionaire FTSE 100 director Massimo Tosato, having one employment contract with the fund management giant Schroders is clearly not enough. Unconventionally, the suave boardroom executive with a house in one of Knightsbridge's most sought-after squares has two.

Accountants said that such a structure could save him many thousands of pounds in tax every year on his earnings, although Schroders declined to confirm or deny this.

Last year, the Italian was paid £1.8m, including a cash bonus of £1.4m. It was not an uncommonly good package by the his standards: the previous year saw him earn £2m.

Schroders' accounts fail to explain how much of his pay, bonuses, pension and other incentives were for one contract and how much for the other.

As befits his status as a senior Schroders executive of decades standing, and a well-known figure in the fund management world, he also has more than £3.5m worth of Schroders shares to his name.The company would not comment on where, geographically, Mr Tosato's two employment contracts are based. Tax accountants said that in such circumstances one contract might be held in a low-tax environment in order to pay considerably less income tax.

The Government last week moved to clamp down on a tax loophole under which "non-domiciled" residents (non-doms) with split employment contracts could avoid duty by putting their earnings through low-tax foreign jurisdictions. From April on, foreign earnings claimed to have been made in low-tax countries will be subject to UK taxes. The change, which it is hoped will add £270m to the Treasury's coffers in the next five years, is the talk of the country's super-wealthy foreigners.

Cormac Marum, a tax accountant at Harwood Hutton, said: "The fear was that these non-doms would be claiming to earn a pittance on a minimum wage in the UK but make a fortune in their overseas job. That's where the Treasury got their numbers from. The trouble is, these numbers are always complete guesswork."

It is not known whether Mr Tosato is a non-dom, and Schroders declined to comment on his domicile status. It said his two contracts exist to "reflect the nature of his duties as executive vice chairman in the UK and as global head of distribution".

Mr Tosato's name was dragged into a political tax scandal in Italy last year over a property in the chic Parioli district of Rome that he sold to the government minister tasked with clamping down on tax avoidance. The minister, Vittorio Grilli, registered his purchase price in official documents at €1.06m (£900,000) while obtaining a mortgage of €1.5m, Bloomberg reported in a story picked up by the Italian media. Bloomberg pointed out that Italian property deals were often reported to be less than the actual price paid to reduce taxes. The minister later said he had made an additional payment to a member of Mr Tosato's family for carrying out work on the property, which he said explained the anomaly. He also denied avoiding any tax. There is no suggestion of wrongdoing on Mr Tosato's part. A Schroders spokesperson said on his behalf that the transaction had been "completely legal and above board" and all details had been declared to the authorities more than nine years ago.

When asked about Mr Tosato's seemingly unconventional employment arrangements, Schroders said in a statement that he "spends a significant proportion of time overseas, reflecting Schroders' global Distribution presence... although over 80 per cent of his remuneration is paid in the UK reflecting how his role has changed over the last eighteen years with Schroders".

The Government's clampdown in the Autumn Statement on non-doms using dual-contracts was combined with another assault: the levying of capital gains tax on the sale of homes in the UK. Until now, rich foreigners, largely from Eastern Europe – the troubled southern European countries and Asia – enjoyed extremely low tax on the profits they make when they sell investment properties in the UK.

The Chancellor expects to raise £125m from the move by 2018. Mr Marum said: "Combined, these measures will take some of the polish off London being the ideal destination for wealthy foreigners – but to be honest, it has been so good for non-doms for so long, you had to wonder how long it would last."

A tax lawyer who specialises in Russian clients said: "This will not be enough to drive people away. These people have made England their family home; they do not want to uproot them again. And you have to remember, many of them are frightened to return to Russia because they are worried they may not be able to leave again."

In the meantime, Mr Tosato's neighbourhood shops, Harrods, Burberry and Harvey Nichols, will keep enjoying a share of their fabulous wealth.

Start your day with The Independent, sign up for daily news emails
News
Young Winstone: His ‘tough-guy’ image is a misconception
people
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
News
Outspoken: Alexander Fury, John Rentoul, Ellen E Jones and Katy Guest
newsFrom the Scottish referendum to the Ice Bucket Challenge, our writers voice their opinions
PROMOTED VIDEO
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Arts and Entertainment
Pharrell Williams' “Happy” was the most searched-for song lyric of 2014
musicThe power of song never greater, according to our internet searches
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Voices
Strictly Come Dancing was watched by 6.9m viewers
voicesIt has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Arts and Entertainment
Roffey says: 'All of us carry shame and taboo around about our sexuality. But I was determined not to let shame stop me writing my memoir.'
books
News
Danielle George is both science professor and presenter
people
News
i100
News
Caplan says of Jacobs: 'She is a very collaborative director, and gives actors a lot of freedom. She makes things happen.'
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
DJ Taylor: Good taste? It's all a matter of timing...

Good taste? It's all a matter of timing...

It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

How we met

Olivia Jacobs and Ben Caplan
Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

Bill Granger's healthy breakfasts

Our chef's healthy recipes are perfect if you've overindulged during the festive season
Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

Who does your club need in the transfer window?

Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

Michael Calvin's Last Word

From aliens at FA to yak’s milk in the Tour, here’s to 2015