FT: Hedge fund shift costs UK £500m



Hedge fund shift costs UK £500m

By Sam Jones and Vanessa Houlder
Financial Times
Published: October 1 2010 23:00

Britain will lose hundreds of millions of pounds in tax revenues every
year as a result of top hedge fund managers moving overseas, with the
departure of just two to Switzerland estimated to cost the Treasury
more than £200m.

So far only a handful of hedge fund partnerships have moved their
headquarters offshore but a far greater number of individual employees
than previously acknowledged have moved to subsidiary offices abroad.

One in four hedge fund employees have left London to move to
Switzerland, where the tax regime is considered more stable, according
to the consultancy Kinetic partners.

The cost to the Revenue is difficult to calculate but based on a
conservative 28 per cent tax rate paid by the 1,000 or so hedge fund
managers that Kinetic said had left, the UK will have forgone nearly
£500m in taxes, although it could be much more.

The average City hedge fund manager earns about £1.5m-£2m a year.
While some had structured their incomes to pay tax at the 28 per cent
corporate rate, many paid much more.

“The loss in terms of tax for the Treasury is potentially
significant,” said John Hanifan of accountancy firm Ernst & Young.
“There are a significant number of managers earning a significant
amount of money who do not undertake tax planning and are committed to
paying tax at 40 per cent.”

The departure of two industry leaders – Alan Howard, founder of Brevan
Howard, Europe’s biggest hedge fund, and Mike Platt, founder of
BlueCrest Capital, the third biggest – will cost the Revenue £200m,
according to a Financial Times analysis of their funds’ accounts. Both
men declined to comment.

The pair moved to Geneva this year alongside teams of top traders who
will also have paid tens of millions in tax each year while based in
the UK.

Hedge funds such as Brevan Howard and BlueCrest assiduously avoid
publicity, but in correspondence with investors, both have cited the
threat of onerous new rules from the European Union and the desire to
remain internationally competitive as reasons for moving.

The trigger for the departure of many hedge fund managers was the
introduction this year of the 50 per cent tax rate on earnings above
£150,000. But increasingly, they also complain about political attacks
and regulatory uncertainty.

According to the government’s own estimates, one-quarter of all income
tax received this year will be paid for by top earners subject to the
new 50p tax rate.

But the Treasury has acknowledged that the higher rate will yield less
than one-third of initial projections, because of people moving
overseas and the reluctance of high earners to come to the UK.

The small, nimble and highly lucrative hedge fund industry is one of
biggest employers of high earners in the UK. London has long been the
main centre for hedge funds outside the US.




David Woolley

sufaud said:
Hedge fund shift costs UK £500m

By Sam Jones and Vanessa Houlder
Financial Times
Published: October 1 2010 23:00
I assume that some of those on alt.laywers are familiar with the
Copyrights, Designs and Patents Act!

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