LONDON (Reuters) - Britain’s private wealth industry, servicing the colonies of rich foreigners resident in London, was granted a boost after reforms of how their overseas money is taxed proved more benign than many had feared.
In a budget speech on Wednesday, Chancellor George Osborne said people resident but not domiciled for tax purposes in the UK -- commonly known as ‘non-doms’ -- will have to pay more after living in Britain for 12 years.
With the new coalition government grappling with deficits, many had feared a significant hardening of the non-dom rules, potentially damaging London’s burgeoning wealth management industry.
So called non-doms, who currently have to pay a 30,000 pounds annual levy after seven years, will pay 50,000 after 12 years but will not pay tax on foreign income or capital gains remitted to the UK if it is invested in British business.
“Everyone was worrying about the worst case scenario... It’s a lot better than it could have been,” said Sophie Dworetzsky, a partner specialising in private client wealth management at law firm Withers.
Many had warned of damage to a competitive advantage enjoyed by London wealth managers, running money offshore for thousands of highly paid foreign financiers working in the City and less economically active residents who use London as a tax haven.
A multi-billion dollar industry providing investment and banking services including premium credit cards and private jet financing had grown up around these communities but faced an uncertain future if the rules had hardened.
Osborne also said there would be “no other substantive changes” to the non-dom rules for the remainder of the current parliament.
Though long-term resident non-doms will pay a higher charge, the tolerance of remittances if they are invested in British business, is widely expected to boost the appeal of London as a place of residence for the global elite.
“(This) is encouraging from the point of view of encouraging this community to invest in the UK,” said James Johnston, a partner at lawyer Bircham Dyson Bell.
“It should stimulate a lot of inward investment and we need these wealthy people to bring their money and their largesse here,” said Ronnie Ludwig, a partner in the private client team at accountants Saffery Champness.
Campaigners against tax havens were disappointed, however.
“Oh dear. It looks like the chancellor has let non doms off the hook,” said John Christensen, director at Tax Justice Network, which campaigns against tax havens.
Editing by Sinead Cruise