UK Hedge Funds Tax

Hedge Fund Managers Flee 51% Tax in U.K.

The UK government's announcement that by April it will begin taxing individuals earning more £150,000 (about $247,000) a year at a rate of 51% has led many hedge funds to leave the UK for more tax-friendly countries. Already hedge funds managing an estimated $15 billion have fled in response to the impending tax.

Lawyers in the UK have said that a large portion of their work is now devoted to counseling hedge fund managers on ways to leave the country. A partner at accounting firm, Ernst & Young, said that most hedge fund managers are debating the benefits of moving to Switzerland. Swiss cantons are preparing for the incoming business from hedge funds fleeing the UK and are offering low tax rates to businesses entering the country (the tax rate is still only 14% without a discount).

David Butler, founder of professional-services firm Kinetic Partners, said his company had advised 23 hedge funds on leaving the U.K. in the 15 months to April. An additional 15 are close to quitting the U.K., he said.

Hedge fund Amplitude Capital took its $735 million in assets under management to Switzerland at the start of this year. In May, Odey Asset Management threatened to move. All the hedge funds that have left the U.K. for Switzerland are concerned about tighter European Union regulations, as well as a new top rate of income tax announced by the U.K. government.

Recent research by accounting firm PricewaterhouseCoopers suggested that married bankers earning £250,000 a year in the U.K. would retain less of their income after 51% tax than their counterparts in Paris, Frankfurt, Singapore and Dubai. Source

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