The UK budget has been roundly denounced as a threat to competition and future entrepreneurs. The 50% tax on earnings over GBP150,000 has been described by some as Mickey Mouse economics.
However a report by the Financial Times has stated that the budget will also allow London to compete with Dublin and Luxembourg as an offshore fund center.
The budget introduced a tax elected funds regime, which allows the fund to avoid tax, instead the tab is picked up by the investors in the fund.
Tax-exempt investors, such as Isas, Sipps, and hard hit pension funds, will find the prospect of domiciling a fund within the worlds financial sector more appealing that either Luxembourg, a domicile racked with lawsuits, or Dublin, the capital city of perhaps the greatest economic casualty in the Euro-zone.
The FT states: The UK government has created a white list of instruments that funds are able to invest in without running the risk of this activity being classed as trading, a ruling that potentially made a fund subject to capital gains tax.
Troubled funds in Dublin, and expanding funds in the US, may look towards London as a potential site for relocation. However, fund managers may wish to pay their salaries in an offshore account.
The FT article can be found here