Will wealthy foreigners be forced from London?
It’s become a second home for thousands of Russia’s new wealthy elite, but now a proposed tax crackdown in Britain is casting a shadow over London. The UK government is targeting non-domiciles.
As one of the world's top finance centres, London has long been considered an attractive place to invest.
For Russians buying super-prime property, it is not just trendy. It also offers long term returns. UK tax rates are lower than much of Europe and, until recently, both were steady and transparent.
“They already have a strong interest in UK which might be either through the fact that their children are getting higher education in London, or they might have some business ties. A lot of Russian people would have tax benefits would be much easier to do business there as opposed to Europe,” believes Aleksandr Shatalov, partner at IntermarkSavills.
However, that’s changed with the UK proposing a new tax on non-domiciled people – those who aren’t permanent residents but have lived in the UK for more than seven years. The proposal would impose an annual, personal fee of 30,000 pounds, or 60,000 dollars. It may also drag overseas income into the UK tax net.
Asked if the tax changes will discourage their clients, market players are clear.
“Undoubtedly. We don’t know how many, but if we start taxing these non-doms, the incentive to stay in London will be reduced and there are many tax havens they could quite easily just relocate to,” said Guy Meacock from Prime Purchase Property Acquisition.
The new rules won’t just affect high-end Russian clients. In fact, the tax changes could be a bigger problem for those of more modest means.
“They do invest money in property in the UK not as a risky place and not as the main asset – so usually it’s a diversification of their assets and it’s just only a part of their wealth,” said Ilya Shershnev, Business Development Director at Swiss Realty Group.
The law will be outlined in detail next month. There have already been loud protests from foreign businessmen – and those who believe they contribute strongly to the UK economy.