1 This list is based on our estimates of the minimum wealth of Britain’s 1,000 richest people or families. The actual size of their fortunes may be much larger than our figure. The valuations were carried out at the beginning of January 2006. Where we say people are worth a certain figure, the present tense is used for brevity, though we are taking the January valuation date. As with last year, with volatile stock markets in February and March, some fortunes based on shares in quoted companies may be much lower. We have taken account of this but stick broadly with our January valuation date to give consistency with past Rich Lists and with other people in today’s list.
Click here to see graphic of agricultural land values
2 We measure identifiable wealth, whether land, property, racehorses, art or significant shares in publicly quoted companies. We exclude bank accounts — to which we have no access — and small shareholdings in a private equity portfolio.
3 We tend to be cautious and try to give due consideration to liabilities. With our customary caution, we keep very low-profile rich people at last year’s value where we have no new information on their wealth.
4 Many individuals in the list have generated their personal wealth from the sale of successful businesses. In valuing them, we have to take account of the tax paid on the sale proceeds. The simplest assumption would be to make a 40% deduction for capital gains tax (CGT). However, these entrepreneurs will have taken professional advice to reduce their tax bill. Not to be outdone, we have also taken professional advice from tax experts at Price Waterhouse Coopers, who have helped us produce the following more realistic assumptions on tax (we are indebted to them for that help and would point out that the analysis is based on Price Waterhouse Coopers’ extensive experience in the field and no information on any individual PWC client has been disclosed). The tax experts tell us that the notional 40% rate can often be reduced to 25% or even zero depending on whether the business is quoted or unquoted and on factors such as residency.
5 On inheritance tax, we have again taken advice from Price Waterhouse Coopers. While tax is payable on assets held at death at the rate of 40%, no tax is paid on assets transferred by gift seven years prior to death or on those assets which pass to a surviving husband or wife. Where there is no surviving spouse, it is assumed that sufficient planning will have been undertaken to reduce inheritance tax to a residual 5% rate. We assume foreign nationals will have taken advantage of the non-UK domicile status to avoid inheritance tax liability.
6 We have stuck to some broad rules, widely recognised within the accountancy profession, to arrive at our valuations. All share stakes in publicly quoted companies are valued at the price given in the Financial Times in early January 2006, to correspond with last year’s list. When there has been a sharp subsequent rise or fall in the shares, we have taken that into our calculations where circumstances dictate.
Private companies, and therefore stakes in them, are valued on the basis of their most recently reported pre-tax profits less a notional tax charge, multiplied by the relevant price-earnings (p/e) ratio. The p/e ratio is the current share price divided by the most recent earnings per share. As private companies do not have a quoted share price, the p/e ratio for every private company in the past has been calculated by using the relevant sector’s average p/e ratio at the beginning of January. Or, when we have found a quoted company that nearly matches the private company in business activity, we use the quoted company’s p/e ratio as a yardstick for valuation. Where appropriate, we have also valued companies on their net assets, reflecting our cautious approach to valuations this year.
Family shareholdings are agglomerated where it is obvious that the family acts together to defend the company’s interests. We usually name and picture the leading family member to represent the whole family’s interests, although in one or two low-key families we have not highlighted a family member and called the entry the Thomson family, for example.
7 Family trusts are also aggregated and included. We have distinguished between trusts held on behalf of family members, usually children and grandchildren, which we include as family wealth, and charitable trusts, which are not included.
8 Land is valued on what and where it is. Most valuable is London land with planning permission, then other urban land, good farming, forestry, poor farming and, finally, desolate land. We take account of shooting and fishing rights. Estimates of agricultural land values have been given by Strutt & Parker, the leading land agency and chartered surveying group. The values per acre appear in the table below.
9 Valuations of pop stars’ wealth are based on research by Cliff Dane, author of the regular series of Rock Accounts books. These incorporate detailed analysis of published accounts and disclosed earnings, catalogue valuations and estimates of income from current activity and retained earnings from music.
10 The art treasures have been valued by an expert who wishes to remain anonymous. We have devised a formula that seeks to take account of the huge tax liabilities faced by the British aristocracy when they sell old masters and similar treasures. Some of the owners, notably the Duke of Buccleuch, face tax liabilities of 80% of any theoretical sale price, but we have generally assumed that about half the sale proceeds would disappear in one form or another to the Inland Revenue.
11 Many new private companies run by millionaire owners have been unearthed this year through the sophisticated computerised searches and analysis of company accounts and directors’ shareholdings from Bureau van Dijk Electronic Publishing Limited (020 7549 5050). Hemscott.net (020 7496 0055) has been very helpful in identifying millionaire directors in quoted companies with stakes worth more than £25m.
12 The 1,000 include people who may not be British citizens, such as Hans Rausing from Sweden, but who live and work in Britain. British citizens abroad are also in, but we exclude Rupert Murdoch, chairman and chief executive of News Corporation, parent company of The Sunday Times, as he is an American citizen and is based in America. Forbes, in its list of the world’s billionaires (March 2006), reckons Murdoch’s fortune has slipped from £4.05 billion to £3.7 billion in a year. If he were in this list, he would still be ranked seventh. We include citizens of the Irish republic only if they have extensive UK business interests or were born here. The 250 richest Irish people, north and south of the border, are listed. Similarly, the 100 richest Scots are listed. The Scottish list contains 61 entries that appear in the main list and another 39 that do not make it into the main 1,000. The 24 Welsh people in our main list are highlighted separately.
13 We have used a large network of local correspondents. We offer special thanks to our man who knows the car dealers and has extraordinary knowledge of the rich in general. We acknowledge the help of the News International and Press Association libraries and of Phil Jones, computer expert. The staff at Companies House and Balfour News in Ealing should also be thanked.
14 Anybody with suggestions for names that could be included in future can write in confidence to Philip Beresford, c/o The Rich List, Business Section, The Sunday Times, 1 Pennington Street, London E98 1ST or e-mail philipberesford@aol.com. The deadline for candidates for next year’s list is early in January 2007.
15 Reference sources we have used include the national and regional press, plus a host of other publications:
Canadian Rich List (Canadian Business Online), Australian Rich List (Business Review Weekly), BusinessF1, Quote 500, Bilan, Finans Rich List (Russia), Forbes Germany, Manager (Germany), Challenges (France), New Zealand Rich List (National Business Review), Norway Rich List, Forbes.com, North West Business Insider, Yorkshire Business Insider, Midlands Business Insider, Real Business, Management Today, Director, Estates Gazette, Fortune, Business Week, Investors Chronicle, The Economist, Who’s Who, Debrett’s Distinguished People of Today, Labour Research, The Corporate Register, Who’s Really Who, Nigel Dempster’s Address Book, Debrett’s Peerage & Baronetage, Directory of The Turf, The Fastest Growing Private Companies, The Treasure Houses of Britain, Who Owns Scotland, Who’s Who in the North, David Cannadine’s The Decline and Fall of The British Aristocracy, Brian Masters’ The Dukes, The Sunday Times Fast Track, The Sunday Times Profit Track, Wills Information News Service, Andy Wightman’s Who Owns Scotland, Asian Directory and Who’s Who International, Sunrise Asian Rich List, The Midland Millionaires by the Birmingham Post, Northern Ireland’s Top 100 Companies by The Belfast Telegraph, The Sunday Times Rich List 2005-06 (published by A&C Black, www.acblack.com). WealthWatch, produced by Sunrise Publishers (01208 832 272, www.wealthwatch.co.uk) has been invaluable in providing intelligence on the rich and many new leads.
