The fallout from the Government's controversial bonus tax was felt in earnest yesterday as one of the Square Mile's biggest trading companies paved the way for its staff to move abroad to more attractive tax regimes.
Tullett Prebon, an interdealer broker, has offered employees the chance to move to one of its overseas offices days after Alistair Darling announced the 50 per cent "supertax" on bank bonuses in his pre-Budget report.
The news comes as banks have started to move traders abroad to avoid the more punitive tax regime, in an attempt to hold on to valuable staff.
Terry Smith, the chief executive of Tullett Prebon, sent an email to senior managers last week to say the group would help any of its brokers that wanted to move to regions with "more certain tax regimes".
Employees at Tullett, which trades derivatives on behalf of investment banks, can transfer to one of its other offices, which include Switzerland, Bahrain, Hong Kong and Singapore.
However, some industry insiders said Tullett, which employs about 700 brokers in London, may be jumping the gun because the tax might not affect interdealer brokers at all.
"The Treasury is dragging its feet on explaining fully who is affected," the source said. "It is understandable that Tullett is looking at how the bonus tax affects employees, but can you really run your business on one-off issues?"
Mr Smith's email conceded that the company was not sure whether the tax would affect it, but said Mr Darling's "explicit refusal to guarantee that similar 'one-off' taxes will not be imposed next year and in subsequent years, has caused a number of you to once again raise the matter of relocation out of the UK".
A spokesman for Tullett added: "The board has concluded that it is in the best interests of shareholders to respond to requests to relocate out of the UK and will seek to facilitate, where possible and appropriate, relocation to the company's other offices around the world which have more certain taxation regimes."
The company fears that if it does not offer its brokers the chance to move, they will join foreign competitors who could offer a better deal. The company refused to be drawn on whether it would move its headquarters out of Bishopsgate in the City.
As public and political hostility towards bankers has escalated – especially over the return of big bonuses despite the downturn – the Treasury pledged last week to slap a one-off 50-per cent tax on bonus payments of more than £25,000.
Moving staff would not be a big problem for Tullett because interdealer brokers can trade from anywhere. In a country such as Switzerland, in a similar time zone, they could even "get an extra hour in bed", as one City source pointed out. He added that while no companies had made such a sweeping move as Tullett, "many investment banks are moving individual trading desks abroad because of the tax".
The source said it was not essential for interdealer brokers to be in London but added: "This is where many of the clients are. If [a broker] has to get on a plane every time they want to win a new mandate, it becomes difficult to pull off. The most important thing is how best to service your clients at the best cost. Personal tax is taken into account but it isn't the primary driver."
Tullett is embroiled in a legal wrangle with BGC, which it accuses of trying to poach 170 of its staff.Reuse content