JERMAIN DEFOE Thinking On His Feet - Mayfair Times

50
property
LONDON HAS BECOME A
MAGNET FOR THE WORLD’S
SUPER-RICH – BUT IT’S NOT
JUST BECAUSE OF THE
BEAUTIFUL HOUSES AND
CULTURAL DELIGHTS THE
CAPITAL HAS TO OFFER.
LUCY DENYER REPORTS
The
national
wealth
service
Ever wondered why there are so many foreigners living in
London – particularly in prime areas such as Mayfair? Data
from Knight Frank’s Mayfair office shows that, in the last two
months, only three buyers locally have been British – the rest
have been Indian, Kazakhstani and Greek. Meanwhile
property availability in the capital’s most exclusive enclave is
almost half of what it was last year, according to Peter
Wetherell, managing director of the eponymous estate agent.
London – especially expensive and beautiful areas such
as Mayfair – has become a haven for the super-rich. Of the
23 billionaires in London, only 12 are British. Forbes, the
house magazine for the rich and powerful, has identified a
large part of London’s appeal as deriving from the taxation
system. Forbes.com’s Paul Maidment has described this as
“a magnet for the world’s billionaires”.
Among those who call Mayfair home are Anil Agarwal, an
Indian worth £1.4 billion who moved to Britain in 2003, and
James Packer, son of Kerry Packer, the late media mogul,
who reportedly paid £15 million for a newly converted flat set
across three floors at 44-46 Park Street.
It’s not just the beautiful houses, cultural delights and
convenience of prime central London that draw in residents
from overseas. While Mayfair and other areas like it certainly
offer all these things, foreigners who decide to make a home
in the UK also enjoy significant tax breaks.
It all turns on the concept of domicile. This is the place an
individual regards as their permanent home – not the same
as residence, which merely denotes physical presence. Nondomiciled
UK residents make huge savings through the
unique tax breaks they enjoy by being based here.
Allowed by virtue of their status to shift savings outside
the UK, they do not have to pay tax on this money as long
as it is not brought into the country. Similarly, “clean capital” –
money earned before they moved to Britain – is also exempt.
Indeed, it is possible for foreign-domiciled residents to
plan their affairs to minimise the incidence of UK tax to the
extent that some avoid it altogether.
Carole Cook of Mayfair law firm Forsters, which
specialises in property law, says 70 per cent of her clients are
non-domiciled. It makes sense, she says – on a portfolio
worth even as comparatively little as £500,000, keeping the
money outside the UK saves 40 per cent on capital gains
and interest.
The question of whether this is fair or not has long been
raised. After all, UK-resident and domiciled individuals have
to pay British tax on their worldwide income and gains.
But London is currently enjoying a strong position as the
world’s leading financial centre, and there is no doubt that
wealthy non-domiciled residents are contributing to that
success in no small way.
“Possibly without the tax break, London would not have
become the global economy it has,” says Ms Cook. “Nondomiciled
beneficiaries bring huge benefits to the economy.”
It would seem that the government is taking the same
stance. Although papers from this year’s Budget say that the
tax rules are being reviewed, the government has not
delivered on its commitment to publish a consultation paper
on the subject.
So, while Gordon Brown’s Budget will have reminded
some of Mayfair’s wealthy residents just how much money
they pass on to the government, others will have been
relieved that the Chancellor seems to have dropped the issue
of tax reform.
Which means that Mayfair’s position as being highly
attractive to all wealthy individuals – no matter where they
hail from – looks set to remain.