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 the most sought after squares in London’s Knightsbridge has two.
Accountants said that such a structure could save him many thousands of pounds in tax on his earnings, although Schroders declined to confirm or deny this. Last year the Italian made £1.8m, including a bonus of £1.4m. It was not an uncommonly good package by his standards: the previous year saw him earn £2m.
The Government last week moved to clamp down on a tax loophole whereby non-doms with split employment contracts will no longer be able to avoid duty by putting their earnings through low-tax foreign jurisdictions. From April on, foreign earnings claimed to be made in low-tax countries will be subject to UK taxes. The change, which is hoped to bring the Treasury £270m in the coming 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 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. Schroders declined to comment on his domicile status and 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”.
Schroders’ accounts fail to explain how much of Mr Tosato’s pay, bonuses, pension and other incentives were for one contract and how much for the other. As befits his status as a senior executive of decades standing and a well-known figure in the fund-management world, he has more than £3.5m Schroders shares.
Schroders would not comment on where 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 to pay less income tax.
Mr Tosato’s name was dragged into a political tax scandal in Italy last year over a property in the fashionable hilltop Parioli district of Rome that he sold to the government minister tasked with clamping down on tax avoidance. Vittorio Grilli, registered his purchase price in official documents at €1.06m while obtaining a mortgage of €1.5m, Bloomberg reported. The report pointed out that Italian property deals were often reported to be less than the price paid to reduce taxes.
The minister later wrote to the news agency to say 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 “legal and above board” and that 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 that he “spends a significant proportion of time overseas, reflecting Schroders’ global Distribution presence, with 37 offices in 27 countries, although over 80 per cent of his remuneration is paid in the UK reflecting how his role has changed in the last 18 years”.
The Government’s clampdown in last week’s Autumn Statement on non-doms using the dual contract tax arrangement was combined with another assault: the levying of capital gains tax on the sale of second homes in the UK. Until now, rich foreigners, largely from Eastern Europe, troubled southern European countries and Asia, have enjoyed low tax on the profits they make from selling properties here. George Osborne expects to raise £125m from the measure from 2016 to 2018.
Mr Marum said: “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 specialising in Eastern European 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 all 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.