One of the highlights of my year - the Sunday Times Rich List came out last weekend. The rich are getting richer – so it would appear - the top 1,000 richest people in the UK have net wealth up from last year’s £723.5 billion to £771.3 billion.
Robert Watts and his team of researchers are of course highly professional in researching their facts and figures, but it would be interesting to compare their list with the information HMRC now has at its fingertips under the OECD Automatic Exchange of Information which became operative last year.
Under this initiative all financial institutions must provide the financial details of any client which does not live in its jurisdiction. This means that for every person mentioned in the Sunday Times Rich List the UK HMRC has precise details of all their financial assets held offshore – and will use it to raise taxes.
– and in addition, it will then charge penalties of up to 200%. For some people this will wipe out their fortune. Although this will take at least three to four years before its impact is felt and registered in the Rich List the impact could be significant.
Many of my clients are already making plans to leave the UK. This is not because, they have not taken and implemented good legal advice, but because no matter how good the advice they do not like the thought of living in a Marxist led country and with the ever-present threat of a tax investigation.
Many of my clients see Jeremy Corbyn, not as a worry, but as an irritant. John McDonnell the Shadow Chancellor is on record as saying that in the first 100 days in power he plans to raise the threshold at which the highest rate of tax of 45% becomes payable from £150,000 to £80,000. This is not a threat to many of my clients who will simply shield their money in a corporate vehicle, until the Jeremy Corbyn storm has passed. However, this hike in taxation is a real threat for a young family living and working in London and trying to make ends meet. For these people this tax rise is a game changer.
John McDonnell also talks of introducing the ‘most comprehensive set of anti-tax avoidance measures ever introduce by a British government so the that the super-rich and big corporations pay their tax just like the rest of us do. The public are fed up wit runaway inequality and a Labour government will take action to address it’. Please!
This is the same old scratchy political mantra – that we hear from every political party.
We already have a distinctly unlevel playing field in tax collection and zero tolerance of planning to avoid tax– HMRC now has all the information it needs to tax the wealthy who have money offshore, without having to wait for leaks or rogue employees.
John McDonnell may proclaim to want to make a real difference – but in fact all he needs is already in place. He just needs to turn up the existing screws - until the ‘pips squeak’. Use the information gleaned under the OECD Automatic Exchange of Information to argue that the structure is a sham and tax the underlying assets as if no structure was in place.
However, this danger seems lost on many of the people Robert Watts interviewed. They are still talking about putting money offshore as if to be out of sight and is to be out of mind of HMRC– it is not!
But one change McDonnell may consider is to tax British citizens rather than UK domiciles. In which case it may be necessary to ‘ditch your UK passport’ as one entrepreneur was quoted as saying in the Robert Watts article.
For most of my clients this would again be an irritant, but it does not bother too many. They can easily get a passport in either Malta or Cypress which would have the added benefit of the freedom of movement throughout Europe.
But despite all this gloom and doom, most of my clients are sanguine.
On Jeremy Corbyn ‘The British electorate isn’t stupid enough to vote those guys in twice.’ Once jobs start drying up because the wealth creators have skipped the country, and the economy is failing they will soon switch allegiance.
And about the undermining of offshore structures – ‘Someone, somewhere will think of a way around the attack’ Which is of course, true. But this won’t happen until the wealthy stop seeing offshore as a solution and if your adviser is still promoting a trust with a protector – switch advisers.
If you would like to know how to plan to avoid a total wipe out call Caroline on 020 3740 7422 or email on email@example.com.