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
Sunday 21 April 1996
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.
- 1 Howard Jacobson: Let's see the 'criticism' of Israel for what it really is
- 3 Belgium fan Axelle Despiegelaere lands L'Oreal campaign after World Cup viral photo
- 4 Britney Spears sings 'Alien' without Auto-Tune in embarrassingly brilliant leaked audio clip
- 5 PornHub begs users to stop uploading video clips of Brazil getting beaten 7-1
Game of Thrones author George RR Martin says 'f*** you' to fans who fear he will die before finishing Westeros saga
Instagram of US airport security chiefs: Lipstick knives and IED training kits among items seized
‘Ryan Gosling got someone pregnant and it's not me. Brazil you think you’re devastated…’
Israel-Palestine crisis: ‘We just want it to end… We don’t deserve to live like this’
Israel-Palestine crisis: Eight killed in Gaza Strip cafe while watching World Cup semi-final
Sustained immigration has not harmed Britons' employment, say government advisers
Australia facing international condemnation after turning around Sri Lankans at sea
7/7 memorial defaced on anniversary of 2005 attacks with ‘Blair lied thousands died’ graffiti
Even when it brutalises one of its own teenage citizens, America is helpless against Israel
There’s a nasty smell in the political air – and it’s coming from the Tories
Vanessa Feltz criticises 'vile' reaction to Rolf Harris allegations
iJobs Money & Business
£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...
£60000 per annum: Harrington Starr: A leading provider in investment managemen...
£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...
£30000 per annum: Harrington Starr: A global leader in trading platforms and e...