I’m sitting in a minicab with a young blond Russian called George Shishkovsky.
We are driving around north London, but he is showing me a London
environment that I have never really seen before.
“We are going down one of the most prestigious roads in the area,” Shishkovsky
says. “On the right and the left you will find houses where the minimum
price is £7m, but they go up to £20m.”
He points out one that is on the market for £15m. It looks like a gargantuan
doll’s house, with Queen Anne-style pilasters and shuttered windows. It is
surrounded by an immaculate swathe of emerald lawn and looks onto a street
furnished with diplomatic parking signs. There are no corner shops, chemists
or children. It’s quiet enough to hear the birds singing. I comment that
this road is hardly representative of life in the capital. “It’s posh and
safe,” responds Shishkovsky.
This Hampstead street, and plenty of others in the suburb, he tells me, is
perfect “non-dom-land”. He should know since he provides buying
opportunities for a host of non-dom clients. His company LondonDom.com
offers a relocation service for mainly Russian, Ukrainian and European
non-doms - the super-rich who come to Britain to work but whose main
residence, or domicile (hence non-dom), continues to be overseas.
Until this month non-doms enjoyed a significant perk as they were taxed on
their UK earnings only. All their other global assets were left in untaxed
peace. Clearly a rather attractive arrangement, and a long-standing one at
that, it was introduced in 1799 to boost the British economy during the
Napoleonic wars.
The archaic nature of the setup cut no ice with Alistair Darling in last
year’s prebudget report, when the chancellor announced a £30,000 annual levy
to be paid by each non-dom (and his or her family) who has lived in the UK
for seven of the previous 10 tax years.
Even though this sum is clearly a bagatelle for most of them, the non-doms now
feel unloved by the Brown administration and many are hastily reassessing
their enjoyment of life in the UK. For enjoyable, it definitely was. “People
who can afford to live here want the best,” says Shishkovsky, a former radio
DJ who got into the non-dom world when he tired of doing celebrity junkets
for listeners back home in Moscow. “They have stayed in the best hotels in
the world and they want to bring that style into their home. When they
arrive they want everything done for them.”
Now he will even fill in the council tax forms for his clients, if asked. “We
will put an entire library of Russian-dubbed DVD films in [a house], if
required, have fresh flowers everywhere, have the fires lit, the sheets
ironed.” What sort of sheets do non-doms sleep in?
“Nine-hundred-thread-count Egyptian cotton only,” says Shishkovsky.
It’s not only the lighter tax burden compared with, say, New York that makes
being a nondom in the UK so attractive for the mega-rich; London is a place
where you don’t typically need a bodyguard, where it is safe (and
acceptable) to travel on public transport and where – until recently, at
least – you could make a bombproof investment simply by buying a house.
“It’s a safe and simple way of taking money out of their country,” says
Shishkovsky. “For many non-doms, living in London is a way they can invest
their money, educate their kids and start a business.”
All of that is changing, he explains. “Taxation and property prices. That’s
what the issues are now,” he says, as we drift around inside a penthouse
flat overlooking Regent’s Park that is on offer for £4.5m.
The flat is painted in inoffensive shades of sienna brown and magnolia. There
is a lot of chrome and leather and the conveniences include
air-conditioning, sliding glass doors, double basins and sexy white pebbles
in the fireplace.
It’s just like a boutique hotel, I comment. “Exactly!” says Shishkovsky.
“These people, they like an international modern style. They have a horror
of living in a Victorian terrace.” Why? “They hate the idea of hearing their
neighbours.”
Funny types, nondoms. Later that night, in the course of recording a Radio 4
documentary about them, I meet a whole roomful. Swept up to the 17th floor
of a glittering new City tower block in the centre of the Square Mile, I go
to a meeting of the Indus Entrepreneurs (Tie), a club that arranges talks by
inspirational figures such as Aditya Mittal, the industrialist, and Tom
Bloxham, the architect. After a speech about how to be a global success,
from James Caan of Dragons’ Den fame, the entrepreneurs mill around eating
canapés and drinking juice. All appear to be non-doms. Most of the ones I
speak to are thoroughly fed up with the chancellor’s changes.
“I’m almost certain to leave the UK within the next couple of years,” says
Conor Foley, an Irish non-dom and chief executive of a market trading
company who has lived in London for the past five years.
“These changes are a spectacular own goal on behalf of the Labour government
and I think it is a mistake they will regret. You’ll see. Swiss, Americans,
Irish – we’ll all move out. There are plenty of other countries we can go
to. The goalposts have changed. And if they are changing, I’m changing.”
Foley resists the charge that he is simply throwing his toys out of his cot:
“I don’t think I’m a special case. I pay all my taxes on the money I earn
here. But why should I pay any levy on my earnings outside the UK? I’m a
huge net contributor to the exchequer.”
This is, of course, a key argument for the non-doms; a report from Stonehage,
the wealth management firm, suggests that nondoms spend more than £16
billion per annum in the UK, a figure nearly equivalent to the GDP of
Luxembourg. Plus, the income tax they pay per capita, according to
Stonehage, represents about eight times as much as the national average.
Intriguingly, Andrew Rodger, a director of Stonehage, suggests that the
government went ahead with its changes before really focusing on this
persuasive data. “We worked with the same data the government had, but they
reached some figures in earlier papers which Stonehage feels are too
conservative,” he says.
Too late. The non-doms have sensed a change in the air regarding their wealth
and they don’t like it. Even non-doms who were born here are rapidly
reassessing their relationship with Britain.
“I was born and educated here but with substantial ties to India,” says Alpesh
Patel, head of an asset management company, at the Tie evening. “This looks
like the slippery slope. There’s been a little bit of taking us for granted.
And there are so many cities in which we can do business.”
He laughs and waves a canapé about: “They have targeted a category of
individuals who are exactly the ones who belong somewhere else. They have
said, ‘Here’s the air fare’. All right then, cheerio.” In Patel’s view, a
fundamental shift of tone will occur thanks to a general nondom exodus: “The
£30,000 doesn’t matter. The point is that if others say they are moving, I
may no longer be in a city with some of the world’s leading entrepreneurs. A
hell of a lot of them are moving to Dubai.
“Then there’s Singapore, which is calling out to be the new London. I’m
thinking I’m in the wrong place.”
Tie’s UK president, Nish Kotecha, an investment banker, suggests that to be a
non-dom is similar to belonging to a club of super-talented frequent flyers
who enjoy a strangely disconnected relationship with the place where they
stash their toothbrush. Born in the UK and educated at the London School of
Economics, Kotecha appears to have an utterly businesslike arrangement with
his natal home.
“I consider myself fortunate to have had the opportunity to grow up here, but
I don’t consider myself a Londoner,” he says. “Or an English person. I
consider myself to be an Indian first. I was born and brought up in this
country, but I consider myself to be a global citizen. I can be at home in
any country I choose to live in.”
A 42-year-old married father of two young children, in good health and with a
flash City job, Kotecha sees himself as “a net gain” to the UK economy.
“Eventually,” he says, “we will retire outside this country. During the time
we are here, we are bringing a lot of value to the UK. What services do we
use that we don’t pay for? I pay taxes on my house, taxes on the land. I
drive a car and pay road tax. I have income that I generate in the UK, which
I pay tax on. We’ve opted out of sending our kids to a comprehensive school.
They were born in a private hospital. We don’t use the health service
because we pay for private health cover.”
He pauses. “What we are doing is subsidising people who do use public
services. Which is fine, if that’s the cost of living here. But how far do
you push that cost – to a point where it finally breaks the camel’s back?
Too much is too much.” Should he – and those like him – be given special
status? “Absolutely.”
Kotecha, who intends to retire in India, says that if business opportunities
arose in the Middle East or Asia he would pack his bags tomorrow: “Because
that’s where I can maximise my value.”
Is life all about “maximising your value”, I wonder.
His answer is as pure non-dom as a 900-thread-count sheet: “I am an individual
with a set of values and skills and I need to ensure that I can maximise the
value I can create with those skills. If the UK cannot offer that
opportunity then I must consider looking elsewhere.”
Rosie and the Non-Doms is on BBC Radio 4, April 19, 10.30am
Does Britain really need to try to retain such superficial and materialistic people? Lets give tax breaks to non-doms that eat fish and chips out of paper and love the damp rotten smell of old Churches.
Chris Stuart, Carentan, France
Lawrie
We are very happy to admit the vast majority are not rich at all.
This idea of the Russian oligarch is a catchy myth, which sells newpapers. There are so few of them it won't make a difference.
The vast majority who are being hurt are professionals who need to work to pay their bills. Mostly bankers, lawyers, auditors, doctors etc.
The problem is that there are so many more of these professionals that are going to leave than "oligarchs" who will stay pay the tax that in the end less money is going to be raised and all remaining UK tax payers will be worse off.
Jerome, London, London
Given that £30,000 is not a very significant sum amongst the super-rich, aren't those non-doms who are talking about leaving Britain admitting that they are only slightly rich? Surely this is not something to which a non-dom should admit.
Lawrie Scott, Stoke Rivers, Devon
Yes,
the non doms can leave
Where I go
- my marginal goes from 40 to 24%
- my average from 33/34% to about 13%
- my capital gains tax from 18% to 0%
- and I am not taxed on income outside of the country
- housing is 50% of the cost of UK or less
- schools are 33% of the cost of the UK
- weather is markedly better and there is more nature
I adore London and Kensignton in particular but "been there, done that".
Jerome, London, London
Can the non-doms just leave? Their argument is that they pay more tax than the average UK citizen and use less public services. This is also true of 49.99% of the rest of us who are unable to channel our income through offshore trusts.
James Dey, London,
Nick
You need to improver your research.
You can enjoy non dom status in major European countries (France, Switzerland, Switzerland, Spain). Some of the small ones as (Jersey, Guernsey, Malta, Gibraltar, Andorra) as well as many of the recent EUaccession countries.
You have more legal rights than a non dom. The vast majority don't have the right to vote in nelections (only EU cititzens can vote at local level).
I've lived in Kensington and Chelsea for 14 years and I'm leaving in August. Even the UK's best neighbourhood can become dull with time. The UK's weather is not spectacular either. I've been to Dubai and to Ipswhich and I have my own views of which one I'd prefer.
Those non doms who leave are right to leave. Government will come after more tax later. Who do you think is going to pay for the drop in Stamp duty collections (as property market crashes) or loss of corporate tax of banks in the City (who've been making losses). Well, those who stay.
Jerome, London, London
Well said Nick of Ipswich. Let the non-doms go to the USA where they will pay tax on their world-wide income for the privilege of living there!
Jennie G, London,
Sure, many non-doms do pay a lot of tax on their UK-earned income and VAT and stamp duty on their consumption and house purchases. The point is that wealthy UK residents also pay lots of tax on these items as well. The difference is that UK residents can't put their bank account savings or investment portfolios overseas and thus avoid paying tax on them. So why should the non-doms morally be allowed to do so ? It's not enough to say that you pay a lot of VAT on your restaurant bills and Harvey Nicks shopping trips or that you avoid using the NHS (apart from A&E of course when needed), so do many British residents.
No other major city in the world allows this non-dom status. You can't be a non-dom in New York, or Paris, or Frankfurt, or Sydney, or Tokyo. So, non-doms are left with threatening to go to Dubai or Singapore. And there's a reason why cities like these have to attract people with their low tax burdens, it's because they are dull and uncivilised places to live.
Nick, Ipswich, UK