Without details, it is hard to analyse Nick Clegg’s proposal, however here are some suggestions HNWs may like to start thinking about
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 could:
· 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 £2 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 different jurisdiction.
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.
Camilla Wallace is a partner in the private client practice at law firm Wedlake Bell