After disquiet over its tax
charge on non-domiciled people in Britain, the UK government is
seemingly changing tack and opening up its doors to wealthy
migrants. This is seen as another encouragement for ‘mid-shoring’ –
a worldwide trend in countries trying to attract the
internationally wealthy.
Go deeper with GlobalData
Britain will ease the way for
wealthy foreigners and entrepreneurs to come to the country to set
up home, according to what private bankers call an important new
policy outlined by the UK coalition government.
High net worth
individuals (HNWIs) and business people will be exempt from the
coalition government’s new cap on non-European migration, to be
introduced on 1 April.
There will be no limit on “wealth
creators” who can come to Britain and pass a wealth test.
Full details on the proposed policy
remain to be spelled out.
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By GlobalDataBut indications are that those
investing more than £5m ($8m) in the UK will be promised residency
within two or three years, and full citizenship within five.
In addition, these investors would
need to live in the UK for only six months a year, down from nine
at present, aligning Britain more closely with Canada and
Australia, which both have long-standing programmes to attract
wealthy migrants.
One motive for the policy,
according to experts, will be to help finance Britain’s yawning
public deficit.
Postive policy
In an interview with Private
Banker International, Nick Hobson, an immigration specialist
at law firm Speechly Bircham, said the new policy was very
positive.
“It’s much friendlier towards
wealthy individuals,” he said.
The current Tier 1 and Tier 2
arrangements for the wealthy who come to Britain will presumably be
abolished under the new strategy. Essentially, those old rules
required investors to have £2m in net assets, enabling them to
apply for a British passport after five years.
Hobson forecasts that the measures
would prove popular with those wishing to come to Britain, although
he could not estimate the likely numbers to apply under the new
scheme.
“We have seen a steady increase in
inquiries (for residency) since the coalition government was
elected this year,” he said. “We have had a really varied response,
with inquiries from everywhere and from a lot of individuals.”
Attractive to investors
from emerging markets
The measures are expected to be
especially attractive to nationals from China, India and other
parts of Asia – reflecting the fact that many high net worth
investors from emerging markets already favour London as a vacation
and business centre.
Many have acquired high-end real
estate in London and elsewhere.
Some private bankers think that the
measure is, in part, aimed at thwarting countries like Switzerland,
which have made a big play of attracting the wealthy with low tax,
now that the UK top tax rate is 50%.
Speechly’s Hobson is not so
sure.
“I think it is more driven by the
recession and the UK requirement for deficit financing,” he
said.
It is clear that Britain and other
nations, such as Switzerland, are involved in a competitive race to
attract the internationally mobile rich.
Growth of
mid-shoring
In
private banking circles, this phenomenon is being called
“mid-shoring”, as countries keen to encourage capital to flow into
their economies make concessions after the global clampdown,
co-ordinated by the OECD, on full offshore banking.
HNWIs are given the opportunity of
putting some of their wealth onshore and gaining valuable residency
rights, but keeping the remainder either offshore or in their
original countries of origin.
The number of rich coming to
Britain, as non-domiciled residents, has fallen by up to 25% since
the rules covering such foreign investors were toughened last year.
That included introducing a £30,000 annual charge on
“non-doms”.
Significant boost to UK
private banking?
Meanwhile, experts are reluctant to
say whether the new immigration relaxations for the rich would help
bring in significant new business for private banking.
The rule changes are likely to
attract 1,000 wealthy migrants in the first full year. Currently,
about 300 wealthy migrants come in annually compared with Canada,
which attracts about 3,000.
Private bankers say that a big
influx of wealth to the UK is likely to come from Ireland, whose
economy has crashed and whose banks are in major difficulties. As
Ireland is an EU member, its nationals face no restrictions on
relocating to the UK.
“There is still a huge amount of
cash in Ireland, much of it made in real estate before the big
property cash, and which is flowing out in order to find a safer
home,” one banker said.
The Channel Islands could also enjoy a windfall from the new
immigration rules.
Michael Betley, managing director of the Trust Corporation of
the Channel Islands, believes the islands are more likely to
benefit from the inward migration of wealthy foreigners wishing to
undertake “pre UK arrival tax planning” to minimise their UK tax
exposure ahead of taking residency in the UK.
