Wealth managers in crisis talks over non-dom fees

Advisers are set to hold a crunch meeting with HM Revenue & Customs today in an attempt to change legislation that could see UK fund managers lose non-dom clients to foreign rivals, even if their clients stay in the country.

Legislation released with the Budget indicated that fees paid to non-dom wealth advisers would be treated as a remittance of offshore income and taxed, placing local fund managers at a distinct disadvantage to offshore competition.

Advisers had hoped the situation would be resolved in the 2008 finance bill, which was released last week, but the section imposing the tax on fees paid by non-doms to fund managers was not amended.

An HMRC spokesman said government had been ‘studying this issue’ and would ‘consider the point in detail’ after the meeting.

City investment banks and private client banks will hope the discussion will see the legislation changed.

Many of the banks are believed to be extremely worried about the implications of the proposed rules. Some banks have indicated that they may have to move as much as one-third of their business off-shore in order to keep the patronage of the non-dom super-rich.

In addition to concerns about losing clients, banks also fear that monitoring such a regime could create a red-tape nightmare as global financial institutions would find it difficult to supervise where in the world work for UK non-doms was taking place.

One solution advisers were set to push at the meeting with the taxman was to provide non-dom fund managers with an exemption similar to that offered to their counterparts who manage money for non-residents.

UK money managers who provide services to non-resident clients are allowed an exemption from tax on fees. Experts believe it may be possible to expand this exemption to include UK advisers who work for non-dom residents.

There is still time to change the legislation and address the concerns of banks and financial institutions. The final version of the finance bill will only go through the commons towards the end of June.

Further Reading:

Fund managers to lose out on non-dom fees