Lure of the havens

`If Blair wins, will the last super-rich person left in Britain turn out the lights.' That could be the warning, and tax advisers are already on the case

Like most people, rich or poor, Steve Morgan would like to keep details about his personal finances a secret. Unfortunately for him, he is chairman of a publicly quoted company and Stock Exchange rules require some disclosure of his salary and shareholdings.

We know therefore that he was paid pounds 164,000 last year. We also know he received almost pounds 4.2m in dividends from Redrow, his Clwyd-based construction company. And we know that his 60 per cent stake in Redrow is worth pounds 185m.

Mr Morgan, 43, is fabulously rich. In the millionaires' league he rubs shoulders with plutocrats such as caterer Sir Rocco Forte, impresario Sir Cameron Mackintosh and the land-owning Duke of Northumberland.

What makes Mr Morgan even more interesting are his well-publicised plans to protect that wealth ahead of a general election, now at most a year away. Last month it emerged he was considering a move to Jersey for personal tax reasons. According to reports in the Jersey press, Mr Morgan is buying the pounds 6.5m Trinity Manor estate from former local politician Major John Reilly. Day-to-day management of Redrow is being handed over to the finance director, but Mr Morgan insists he remains committed to the business and has no plans to sell his shares.

In making plans to move offshore, Mr Morgan has joined a growing band of super-rich executives who are worried that Labour - streets ahead in the opinion polls - may increase the top rate of income tax. So they are making their own contingency plans.

"The recurring trend at this time in the political calendar is that we suddenly receive a lot more inquiries for properties in the Channel Islands and other low-tax areas such as Monaco," says Patrick Dring of estate agent Knight Frank, which acts for Mr Morgan. "Many people believe that an incoming Labour administration may raise taxes on the wealthy. They want to move before their money is taxed any further."

With a flat tax rate of 20 per cent, versus a top rate of 40 per cent in the UK, Jersey's attractions are obvious, though only those with minimum assets of pounds 10m and a guaranteed annual income sufficient to ensure payable income tax to the tune of pounds 150,000 are even considered for residency.

Famous tax exiles who meet these strict qualifications include globe- trotting celebrity interviewer Alan Whicker, golfer Ian Woosnam, singer- songwriter Gilbert O'Sullivan and Kevin Leech, founder of the drug company ML Laboratories, who is an active property player on the island.

The island's lure as a tax haven will be soon further enhanced when a new pounds 30m arrivals and departures lounge opens at the airport. There are an average of five flights a day to London's Heathrow taking 50 minutes each. A return business class fare costs pounds 222 - small change for a would- be commuter like Mr Morgan.

It is not just well remunerated directors who are engaged in pre-election tax planning. "We are busier than in the run-up to previous elections," confirms Tom Richardson, senior estate manager at estate agent Strutt & Parker, whose clients are mainly wealthy rural landowners. "Clients are contingency planning more than ever."

Fears of higher tax bills on both income and capital are driving this unprecedented level of interest. Mr Richardson estimates that one of his client's estates would see its inheritance tax bill soar from pounds 750,000 to pounds 1.35m if Labour were elected.

Top accountancy firms are also reporting brisk business as they organise meetings for clients to discuss tactics in the event of a Blair government.

Leading firms such as Coopers & Lybrand and KPMG are busy preparing booklets and hosting seminars on tax planning. In one leaflet, accountant Ernst & Young says there is a "reasonable chance" that the top rate of income tax under Labour will be 50 per cent: "The question is at what level it would take effect." Other firms are contemplating a tax rate as high as 60 per cent.

Tax is firmly back at the top of the political agenda after the candid admission from Clare Short, Labour's transport spokeswoman, that people like her, with an MP's income of pounds 34,000, ought to be paying more to the Inland Revenue.

Her comments were seen as an embarrassment to a Labour leadership that is keen to cultivate the middle-class vote and exorcise the memory of the 1992 election, which Labour believes it lost largely because of a high-tax tag.

Tony Blair has repeatedly said that Labour has no plans to increase the top rate of tax, but if it does decide to, it will say so in its general election manifesto. Certainly, a return to the penal top rates last seen in the 1970s and early 1980s is not thought to be on the cards.

The problem for tax advisers is that they do not know what Labour really has up its sleeve. "Until Labour gives more precise ideas it is very difficult to say anything concrete on income tax," says Paul Knox, senior tax manager at Ernst & Young. "We won't know until the election campaign begins; it's all very speculative. But some clients, especially those who remember the 1970s, still have quite a fear of what might happen if Labour is elected."

If Labour is keeping its powder dry on income tax, more is known about its attitude towards inheritance and capital gains taxes, which the Conservatives have hinted they might abolish. Labour wants to tighten the existing regime on the former, possibly by targeting lifetime gifts, and may modify CGT to encourage long-term investment.

Apart from the perennial issue of closing tax loopholes, other Labour reforms could affect the numerous foreign tax exiles who find Britain's existing tax regime attractive. Many of them are believed to be generous donors to Conservative Party funds.

In the past Labour has attacked the iniquity of persons not resident or domiciled in the UK who do not seem to make a fair contribution to taxation. In future, residence could be determined by the number of days spent in the country in a tax year.

But Labour will have to tread carefully. Previous attempts by the Government to introduce residence and domicile reforms were scuppered after running into fierce opposition from powerful multinational lobby groups who threatened to withdraw investment from the UK. "A change in the law of domicile would mean a lot of business withdrawn from the City," warns Mr Knox.

Tax experts are also finding it difficult to square Mr Blair's recent speeches to business audiences in America and the Far East welcoming inward investment with Labour's consistent attacks on the concepts of domicile and residence. "Many of the individuals who would be affected are expatriate executives working for those very companies," says Ernst & Young in its leaflet.

Against this background of uncertainty, the super-rich are being urged to take advantage of tax reliefs and exemptions which may be repealed by a new government. That may mean triggering a tax liability now to avoid what may be a much larger exposure later. "Pre-election planning is always a calculated gamble," admits Mr Knox. "Who will win? If Labour wins, would a budget really follow within six weeks? Would any changes be retrospective?"

However, talk of a lemming-like rush for the departure lounge and reports of huge movements of funds overseas are somewhat wide of the mark. "Assets are being transferred to the next generation but nobody is running for the exits yet," says Mr Richardson of Strutt & Parker.

And managers of leading building societies with branches in Jersey and the Isle of Man simply do not recognise reports of record deposits being made in offshore accounts.

Even Conservative Party Central Office was unable to come up with a single executive who has said they will be turning out the lights if Tony Blair enters Number 10.

"We really don't have that much," said a spokesman. The best he could come up with was a report last year in the Daily Express quoting Scottish snooker world champion Stephen Hendry as saying he would leave Scotland for England if Labour imposed a tartan tax.

If anything, Britain's entrepreneurs are quietly imitating their counterparts in Hong Kong, which is due to be handed over to Chinese rule next summer. Risks are being minimised, bets hedged and options covered. Above all, fingers are being crossed that the tax bombshell is not dropped again. If it is, they know where to run for cover.

Arts and Entertainment
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
Arts and Entertainment
Star turns: Montacute House
ebooksAn evocation of the conflict through the eyes of those who lived through it
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model of a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution