HedgeCo.Net (West Palm Beach) – Prominent hedge funds and private equity firms in London have a bad taste in their mouth after a whirlwind of tax scares imposed by British government.
UK Chancellor Alistair Darling once again flip-flopped regarding increased taxation on non-domiciled residents.
A non-domiciled resident is a foreigner living and working in the United Kingdom, who only pays taxes on their UK income – not any overseas income. The latest proposed legislation called for a flat rate tax of £30,000 (approximately $58,000), a year for all individuals who have lived in the UK for more than seven years.
This news caused quite the stir amongst London based hedge funds. Out of the ten largest hedge funds in London, 35% of the directors on non-domiciled residents.
Simon Walker, chief executive of the British Private Equity and Venture Capital Association pleaded, “Some of our members – particularly international ones – will be significantly affected and we think some people will leave the UK. We urge discussions at the Treasury to offset taxes against US taxes to be made a priority.”
In addition to hedge funds, 75% of executives working in US Private Equity firms located in the UK would have been affected by the proposal. Senior officials urged the government to give this matter careful thought, since a resulting migration of talent to other countries could have a massive impact on London’s economy.
The pressure finally made Darling retract on his statements, and the Treasury assured non-doms that the plans, which also included greater disclosure on offshore trusts, would be dropped.
The problem now lies in the fact that companies have a mistrust of the UK government, and are especially weary as to what Darling’s next move will be. Last month, he was adamant on imposing a 18% flat rate tax of capital gains. After backtracking on his latest tax plans, some companies aren’t willing to wait around for his next move.
“What has rattled the industry is not the £30,000 levy, it is the fear and uncertainty over what this Government will do next,” said Richard Jordan, a senior partner in a UK private equity firm. “In order to commit to running a business from London you need at least some certainty over three to five years of what the tax and regulatory environment might look like.”
Julie Scuderi
Contributing Editor for HedgeCo.Net
Email: julie@hedgeco.net
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