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November 1, 2007

To Dom, or Not to Dom? Stay!

By Spear's

With Non-Doms now facing a 30k tax bill for living in the UK, Spear’s looks at reasons for splitting London, and also for staying.

Davina Hay celebrates cosmopolitan London – the new playground of the western world and a bubbling melting-pot for the global super-rich.

So, Alistair Darling has decided that after seven years of dancing at Annabel’s, breakfasting at George and paying your Kensington and Chelsea council tax, the City’s ‘non-dom’ brigade will have to start writing out a cheque for £30,000 – just for the pleasure of living here. Considering that London is already one of the most expensive cities in the world – only in Moscow will a Starbucks latte cost you more – is staying here really worth it?

I write as a property lawyer at Mischon de Reya, a firm that specialises in dealing with the behaviourial habits of London’s international moneyed class. What is certainly true is that London has become the global city to live in for a certain breed of international urban professional – whether they be in financial services, hedge funds, art world, investment banking, the law or private equity.

There has been a lot of talk about the above professional species up-footing to Geneva as a result of the new nom-dom tax but people need to remember that the town of Geneva only has a population of 185,000 (about the population of a typical UK market town). When Sir Rocco Forte recently gave a party in Geneva to celebrate the opening of his new Le Richemond hotel, the 800 guests plus 200 staff made up 0.5 per cent of the entire population. My instinct tells me that most private equity and hedge-fund guys I know are not suited to living in a town the size of Shaftesbury – however attactive the view overlooking Lake Geneva.

The real issue is that New York is not the natural option for defection. For decades London was regarded as New York’s uglier sibling, beset with a trademark scruffiness and forever in the shadow of the former’s taller, ampler skylines. In the Bonfire of the Vanities 1980s, London cut a less attractive figure. We were less racy than her younger Mid-Atlantic sister and far less likely to put out.

Today, London has come of age. Now it is London not New York that is the true melting pot, a tribal base for the moneyed, like a rope of pearls strung out across the heart of the capital, she links new money with old. From Russian oligarchs to American venture capitalists, Persian property barons to Greek airline moguls, billionaire publishers to internet tycoons, rock stars to Hollywood royalty, London is the hub of the wealth renaissance that has flooded Europe.

Will this new Gucci snaffle and Prada wearing tribe decamp to the shores of Lake Geneva or Monaco? Of course not. The real reason that the non-doms will stay is that London is now chatelaine to the new global class of the super-wealthy. Resigning from this club is simply not an option. The combination of glamour and exclusivity has created a uniquely appealing playground to entice the rich, and whether you dabble in the world of finance, business, media or fashion.

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London’s favourable status for non-domiciles has also helped turn the capital into an international tax heaven. Will the new ‘non-dom’ tax really affect that many people? The answer is no – and those that do whine and leave will swiftly be replaced by a new army of Herm`es and Bvlgari wearing Lebanese, Czechs, Indians, Poles and Russians to whom the prospect of living on Lake Geneva carries all the social appeal of living in Palm Springs.

This insurgence of foreign wealth has much to answer for. To begin with, the new money flooding in has led to a new millionaire class of Brits who can’t believe that their houses are now worth so much. Although not everybody has cashed in. Easton Neston, the former family seat of Lord Hesketh designed by Nicholas Hawksmoor, went for just £15 million – less than a third of the asking price – to a Russian fashion designer.

The capital’s house prices have been ramped up exponentially – and this year between 60 and 70 per cent of the most expensive have been sold to foreign residents. Never underestimate the nesting instinct of the super-rich – their predilection for spending money on ever-larger houses has been in evidence since the 1980s, it was accelerated in the 1990s, and in the aftermath of the stock market collapse, property investment was deemed a trustworthy crutch.

But as suitcases of cash pass from Kazakh oil magnates to British banking Brahmins, so too a change in the landscape unfolds: London is no longer a paradigm of English culture, nor testament to quintessential England.

London is simply a different City from what it was a decade ago. The English upper-middle classes now populate the less clement corridors of Battersea and Clapham. Not a conscious decision, you understand, more a knee-jerk reaction to the tidal wave of new wealth and their inability to compete. Roman Abramovich has marked Chelsea and Malcolm Glazer, Man United. Rumour has it that an Uzbeq is gunning for Arsenal and Briatore has set his sights on QPR.

But for Richard Caring and his handful of private members’ clubs, London might be lost in translation. Bacon’s Pope and Doig’s Canoe did sell for tens of millions but they are rumoured to be Russian millions, sold at the eleventh hour by a proxy telephone call, the bid sealed. The growing foreign presence in the capital is also a testimony to London’s status as a world stage for social integration and a forum for the wealth renaissance that the city has witnessed in recent years.

Whilst this insurgence of foreign wealth can be strangely disorientating, it is also worth embracing with brio; and it is for this reason that few – if any – want to pack up their Louis Vuitton suitcases just yet. As Byron so long ago said, London is a damned place, to be sure, but to live here is to be a member of the world’s most exclusive residential club.

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