Friday, March 16, 2007

How to get the UK taxman to buy you a jet.

So here we go again. The formula one season is just about to start, personally I am beside myself with excitement. The field is so wide open this year, that it is hard to call... However Ferrari should win this year...Felipe Massa, if you please.

I shall be there at the Monaco Grand Prix, not sipping champagne in the VIP stand, sacrilege! No I shall be in my favourite stand K, sipping an extremely overpriced can of Coke and having my ears blasted off.

Some others will be sat on their yachts not too interested in what is going on. I have a client who actually told me that "he missed half the race" because he was talking to his accountant. This brings me onto my point. There is a lot of 'talking to accountants' going on in Monaco at the moment because of the UK government's sabre rattling over the 'Monaco Boys' flouting the UK tax laws.

This generation of super rich have taken to the Riviera like the proverbial duck to water and it hasn't interfered with their businesses one bit. This is due to the loopholes available under the UK tax system for those who travel in and out of the UK. Basically you are allowed 90 days in the UK without becoming resident for tax. The day you enter the country and the day you leave are not counted towards this 90 days*. So some of the wealthy expat UK businessmen are flying on a Monday and coming back on a Thursday. If you work this out, they can work most of the year in their office in the UK but pay only the tax in Monaco, where they are resident. The tax payable in Monaco? er.... Nil!

This commuting is essentially a tax paid situation. Imagine, if you will, that you are earning $50,000,000 per annum, your tax in the UK would be somewhere around half of that. You can buy a pretty reasonable jet for $25,000,000 to ferry you back and forth, all on the UK Tax Man.

Or you could keep your money and take the helicopter which will get you to Nice Airport and into your first class seat. In less than a couple of hours you will be at your desk in the office. Consider this, if you live in the Thames Valley area in the UK and drive to London to work, it will take you about the same time to get to your desk as our Monaco Boy has taken to get to his.

Problem is, this conspicuous, perfectly legal, activity has become the focus of not only governmental scrutiny, but also of private individuals outraged by the fact that the super rich can avoid tax while their employees are hit with the full range of taxation tools at the disposal of the UK government.

However, I believe it was a British Law Lord who said "It is every man's duty to arrange his affairs to pay the least possible tax he legally can." In other words the voices from Monaco are responding with "Don't hate the player, hate the game" Mind you, those same peers have also gone on record to say: "It is also the Government's duty to ensure that it collects the maximum tax it legally can."

My money is on the government to win this particular battle.

My personal view is that the Super Rich are, more often than not, the people who create wealth in the country. They have taken the risks, made the right moves and created jobs and income for the country. Is it right to take $25,000,000 from man earning $50,000,000? This could be argued all day, but in this particular period of the worlds history, we do not owe our prosperity to shrewd governmental machinations, but more to those who invent, create and build. If we choose to chase them from our shores with punative tax laws then with the global nature of business, those creators and inventors wil choose to do so elsewhere.

Taxation was initially developed in the UK as a 'Port Tax' because, generally that was where the money was. This was levied on those counties which had a part of the county as a shoreline. The government of the day then required more money, probably to wage another war, so decided that they would tax 'Inland' districts, hence 'The Inland Revenue'. Its looks as if this once seafaring inspired tax department is now focusing on the wealthiest port of them all, Monaco and its wealthy expats.
*As of the 6th April 2008 the days of arrival and travel will be included for tax residency purposes.......

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