Mass exodus fails to materialise as new UK tax rules come into force

News - Tax

Written by Ray Clancy

Tuesday, 06 April 2010 08:16

With new income taxes coming into force today (April 06) in the UK the predicted mass exodus of companies and high earners does not seem to have materialised.

Over the past few months prime British companies and high earners have reportedly threatened to pick up sticks and relocate with many considering Switzerland, Ireland and Malta as the UK is regarded as being a hostile environment for the rich.

But there is no doubt that for many a move is still on the cards as they want to avoid paying 50% tax on income over $150,000. Banks and hedge fund firms have been the main focus of reports about potential company relocations. But at the beginning of March, the chemical manufacturer Ineos announced it was thinking about shifting its global headquarters from England to Switzerland for tax purposes. Pound

Britain’s largest privately held company believes the potential saving for the business would be quite significant. ‘We estimate a saving of €450 million on tax charges between now and 2014 by relocating. This would enable us to reinvest within the business and improve our long-term competitiveness,’ said Ineos spokesman Richard Longden.

However, the giant chemical maker remains committed to its 3,700 workforce in Britain and only around 20 of the 170 employees at the company’s current headquarters in Lyndhurst would initially make the move to Switzerland.

There is no doubt that setting up a low maintenance satellite office in Switzerland can save a lot of money but few believe that London will suffer in terms of it being the main powerhouse of finance in Europe. Some 80% of Europe’s hedge funds are currently based in the British capital and there is compelling logic for companies to be situated near other institutions, banks and legal services.

A Swiss government report late last year admitted the country could not ‘match the force of attraction and integration of international centres like London for hiring talent from all over the world’.

There is also a worry that proposed European Union reforms of the alternative investment industry may impede hedge funds working from Switzerland. But there is a group of relocation specialists currently touting for business.

Among them is Marc Rudolf from the Greater Zurich Area business promotion agency that is offering advice for those interested in moving. He claims the unease about high taxes is real. ‘The whole issue is not only about taxes, it is also about insecurity, not being able to plan ahead. Debt in the UK and the budget deficit all point in the direction that taxes, if anything, will not decrease,’ he explained.

With the date for the general election now confirmed as May 06, many may be waiting to see who wins or if there is a hung parliament before making a decision. But no political party has yet pledged to reverse the new 50% tax rate.