Whether it is a genuine step to rebalance the books or a
political gamble to regain the balance of power within the
coalition government following the Liberals' defeat on Lords
reform, Nick Clegg's proposal (described as a 'statement of
intent' by the BBC's political editor Nick Robinson)
regarding the introduction of an emergency wealth tax in the UK has
taken most by surprise.
It has been received by Labour MPs with scepticism, not least
because it does not sit neatly with Clegg's support of the
Chancellor's 5 per cent cut in the top rate of income tax
– dubbed a 'tax cut for millionaires'. Even his
own party are waiting for further detail since Clegg's comments
in his interview with The Guardian did not set out any figures.
Consequently, it is difficult to analyse his proposal within any
conviction; however, what could those with 'considerable
wealth' do to avoid a wealth tax should it be introduced? how
could they shelter their assets? The following suggestions all have
tax implications so advice would need to be sought, however they
split ownership of assets between spouses and family members to
see a reduction in the total worth of an individual below the
threshold (which might be in the region of Ł2 million);
make gifts to reduce their taxable estate;
move assets offshore should the tax only apply to assets
situated in the UK (particularly for non-doms); or
transfer assets into an alternative structure (eg trusts,
foundations, companies and/or partnerships).
However the ultimate response, particularly if the test for the
new tax is residence based would be to up sticks and move
– take yourself, your assets and your business to a
This has happened before, frequently: think Phil Collins, Roger
Moore, Mrs Philip Green, Henderson Asset Management, advertising
company WPP, publishing firm UBM and pharmaceutical company Shire
– to name but a few.
Although some individuals and businesses have returned, this
proposed wealth tax is likely to produce another exodus just at a
time when the government needs to see an increase in revenues.
Clegg has caught the headlines but it takes time before an
initiative such as this becomes formal party policy and even longer
before it becomes law; therefore there will be time for the
'rich' to take advice from their lawyers and accountants as
to how best manage and arrange their affairs. Watch this space.
Originally published in SPEARS
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hief Executive of Guernsey Finance, Fiona Le Poidevin, spoke to
Zoya Malik of Banker Middle East about the Island's financial
services and interests for Middle East investors
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