Britain's £1.5bn maritime industry has joined growing calls on the Government to abandon its proposals for taxing non-domiciles, as advisers to rich non-residents warned many were preparing to leave the UK. The Baltic Exchange, Chamber of Shipping and other maritime bodies said international shipping businesses based in London would move abroad if the Government's changes were brought in.
Experts said that if an exodus takes place it will be because the Government has lost the trust of non-domiciled residents, who fear further changes.
Jeremy Penn, the chief executive of the Baltic Exchange, said: "It is going to be very serious. The overseas or resident but non-domiciled shipping community are extremely concerned about this." London is the world's biggest centre for maritime services, which include shipbroking, ship finance, legal and accountancy services. But Mr Penn said he personally knew half-a-dozen people who were considering leaving, attracted by alternative shipping centres such as Athens, Dubai or Singapore.
Andrew Tailby-Faulkes, a tax partner at Ernst & Young, said the non-domiciles felt there had been a "breach of trust" by the Government and were looking at moving to Ireland, Luxembourg, Jersey and other financial centres. "Every single one of them will be considering their position," he said.
Those thinking of leaving include people working in financial services and also wealthy entrepreneurs who have based themselves in London, he said. International companies such as Shell could also relocate people, experts said.
Sir Digby Jones, the Trade and Investment minister, broke ranks with the Government's official line yesterday, saying the proposed changes made it harder for him to sell the UK as a place to come to do business. The Government tried to limit the damage by issuing a statement rowing back on the comments.
A spokesman for the minister said: "Lord Jones made clear... that he believes it is reasonable that those who are coming here to enjoy the opportunities Britain provides make a contribution towards its prosperity after seven years. He is clear that the UK remains an excellent place to invest and is confident he can go on successfully making that case to people who are considering investing in the UK."
The Treasury intends to charge £30,000 a year to foreigners who have lived in the UK for more than seven years. People not "domiciled" in Britain currently do not pay tax on income earned abroad.
The Chancellor Alistair Darling announced the charge in October but added further measures in draft legislation two weeks ago that increased alarm among the non-doms. A key measure is a clampdown on overseas trusts, which would be taxed in the UK.
Bill Dodwell, a tax partner at Deloitte, said a mass exit by the non-doms was not inevitable and that the detail of the Government's measures still had to be cleared up. He added that if the Government relented on the taxation of overseas trusts, that could make an important difference.
People are also angry about the speed with which the proposals are being brought in, experts said. The Government is consulting on the proposals and intends to bring in legislation in April. John Watson, head of tax at the law firm Ashurst, said: "They have created a muddle by not taking sufficient time over the changes and that is not a good thing because it makes people worry that if major changes can be brought in at short notice they cannot conduct their affairs with any certainty."
The Treasury argued that non-domiciles had been under review since 2003 and that the initial announcement in October gave people plenty of time. It also argued that the changes will tax people fairly who are effectively resident in the UK.
Dominic Stuttaford, a tax partner at the law firm Norton Rose, said the changes could hit London's position as the top centre for initial public offerings by overseas companies. "There will be a knock on effect on the corporate world," he said.Reuse content