'Closing tax loophole would lead to exodus of wealthy'
Friday 06 September 2002
Opposition is mounting to Government plans to close a tax loophole that allows thousands of wealthy UK residents to pay a pittance to Inland Revenue.
The Treasury is looking at drawing non-domiciled UK residents – people who live in Britain but claim another country as their homeland – further into the tax net.
It is expected to publish a consultative document in November that could propose limiting to five years the length of time a foreign national could claim the status.
Currently non-domiciled residents do not have to pay any income or capital gains tax on assets held overseas. It is estimated to cost the Exchequer about £1bn and benefit 60,000 people, most of whom shy away from publicity.
But the Baltic Exchange, the London market for shipbrokers, has warned it will trigger an exodus of foreign shipowners. It said a study commissioned from a Cambridge academic showed a potential loss of 4,500 jobs, £125m in tax revenue and £375m in maritime earnings.
John Buckley, its chief executive, said: "If the long-standing benign arrangements for foreign shipowners were altered, maritime London and the economy generally would face a very serious threat."
Tax experts said the effect could be widespread. Paul Knox, director of private client services at Ernst & Young, said the rule had been a "fundamental tax principle" for years.
"A change in the rules without giving proper thought to the overall impact could switch the UK from being a flexible place for foreigners to spend time to being one of the most disadvantageous places and the ramifications could be quite significant," he said.
A Treasury spokesman said: "We are aware of the views of some groups in the shipping industry but ... the rules should be fair, easy to operate and support the competitiveness of the British economy."
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