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.

Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Ray Whelan was arrested earlier this week
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
Mick Jagger performing at Glastonbury
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
ebookA unique anthology of reporting and analysis of a crucial period of history
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
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

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice