Tax changes are creating an exodus of foreign residents. Jessie Hewiston meets one American who has decided to get up and go.
All over London, the bags are packed and the tickets are booked. The ‘For Sale signs’ have gone up and the removal vans are parked out the front. The non-doms are on the move.
Take Mark Roche. The 54-year-old retired architect is leaving London and moving to Spain to escape the effects of the tax changes.
This is just what the Government didn’t want. The Chancellor, Alistair Darling, recently scrapped plans to tax the offshore assets of the country’s 120,000 registered non-domiciles – foreign residents who don’t pay tax in the UK on their overseas earnings.
He is still sticking to part of the taxation shake-up, however, levying a 30,000 annual charge on non-doms who have lived in Britain for seven years and longer. He is also charging Capital Gains Tax (CGT) on UK homes owned in overseas trusts, another change that will hit the non-doms where it hurts.
Whatever tinkering the Government does to the fine detail, it will be too little, too late for Mark. Because of the impeding levy, the CGT changes – and the increase in the congestion charge that means he will have to pay 25 a day to drive his 4×4 out of his garage – he has decided to sell up.
According to Treasury figures, at least 3,000 of the UK’s non-doms, who between them spent 16.6billion in this country last year, are expected to leave when the changes come into force next month. Ask an estate agent, though, and he or she will tell you the figure is far higher. A 30,000 charge may not be too much of a concern to a hedge fund multi-millionaire, but it is to Mark. Raised in California, he ran his own medium-sized architecture company, Mark Roche Associates, until he retired six years ago, selling it on to his former employees. His company specialised in designing shops; clients included Nike, Mango, Herms and Jean Paul Gaultier.
Before going solo, Mark worked with Richard Rogers for eight years. ‘I suppose, out of all the non-doms in this country, perhaps a third are City-boy high-flyers,’ he says. ‘I suspect the majority, though, are like me: small entrepreneurs. I feel I’ve made a good contribution to this country. I have put food on the table for 15 employees, paid tax for them, and I don’t think I would have been in a position to do that had I not been a non-dom. ‘For multi-millionaires, 30,000 is a drop in the ocean.
But to me it is a lot of money. I also have an investment property that I’m trying to sell by April. If I don’t, I’m going to be hit by the new CGT. I can see clearly that any money you save can disappear into the coffers of the Government simply by its changing the rules.’ Mark bought his home in Hewer Street, W10, a 10-minute walk from Ladbroke Grove Tube station, for 625,000 in 2002, just before he retired. The former Unigate dairy was a shell, derelict for more than 20 years. Mark spent 240,000 turning it into his home. It is now on the market for 2.6 million through Marsh & Parsons. The result is striking. The ground floor has a huge living room plus a guest bedroom and bathroom. On the upper floor, a living room with a huge vaulted ceiling, kitchen and master bedroom merge into one another in an extravagant display of the virtues of open-plan living.
There is also a 500sqft office by the front door, which Mark rents out, bringing in 1,050 per month. He also rents out the property for magazine shoots at 1,000 a day. ‘I’m now moving to Spain, which is not the most logical choice, as it’s not a tax-efficient regime,’ Mark says. ‘Many people do it by living there for less than six months a year, so you avoid being domiciled in Spain and subject to its tax. I intend to keep a holiday property in London to visit friends for one month of the year. The other few months I plan to travel. ‘For me, the most important point about being a non-dom is this: you’re not paying tax for elements you will probably never use. A non-dom is someone who does not intend to stay in the UK; they only intend to stay for their business life. ‘When they retire, they are most likely going to leave, and all that tax they pay is then lost because they are not taking advantage of medical facilities or pensions – all the services that older people require. I feel justified that my non-dom status is relevant and that it helps the economy.’ In response to the Government’s proposals, Aylesford estate agency has opened a branch in Geneva to handle property sales for non-doms relocating to Switzerland. ‘Alistair Darling’s U-turn has done little to reassure my clients,’ says Aylesford’s Andrew
Langton. ‘A worrying number of them are non-doms who are still seriously considering moving out of the country. They think London is too expensive to function, capped off by the congestion charge on 4x4s going up to 25. The feeling is that the Government doesn’t want them here. The bottom end of the market is already suffering because of the credit crunch; now the top end of the market is likely to be affected too.’ Camilla Dell, a partner of Black Brick buying agency, believes that her clients are more worried by the CGT changes than the 30,000 levy. ‘I have clients with multiple investment properties in London who, after April, will have to pay CGT, and are planning to sell before then,’ she says. ‘The result will be that we’ll suddenly have a lot of non-doms selling at the same time and there’ll be more choice and flexibility at the top end of the market, something we haven’t seen for the past 18 months.’