Tax plan could deter high-flyers

Levy for non-domiciled residents threatens the recruitment of top academics, writes John Gill

February 28, 2008

The flow of distinguished overseas scholars to UK universities may be stemmed by proposed changes to the country's tax regime.

Malcolm Grant, provost of University College London and chairman of the Russell Group of research-intensive universities, has voiced concerns about the plans to tax the offshore income of non-domiciled residents or to charge them a £30,000 levy.

He said the proposals to tackle "fat cat" foreign residents were "disproportionate" when applied across the board and risked nullifying the benefits to scholars of being in the UK.

High-flying academic non-doms are likely to be concerned about tax on investment or property rental income from abroad or earnings from overseas teaching and consultancy.

Professor Grant said: "It is an unintended consequence that the proposals will impact more adversely on someone on a relatively low income than on a multibillionaire.

"The sort of people we're worried about - and it's not just Russell Group, it's within the 94 Group and other universities too - are those we've recruited from abroad.

"In some cases they are UK nationals who have worked, say, in the US or Canada for a period, and we're recruiting them back, or they may be US or Canadian nationals.

"People will come to the UK for perhaps their last eight to ten years; in the meantime they will have built up a pension arrangement elsewhere, and they're not going to get much by way of a pension from working for ten years in the UK.

"If their salary in the UK may be up to £100,000 at the top end, then a £30,000 non-dom tax on that is a serious hit. I've had one case brought to my attention where a university recruited a husband and wife on the same basis, and for them it's a £60,000 hit, although one is earning much less than the other."

In 2005-06 there were 31,477 non-UK nationals in academic posts in UK higher education, almost a fifth of the total.

Professor Grant said the UK had been an attractive destination for world-class academics in recent years because of the strength of the pound, a feeling that UK science was increasingly exciting in comparison to lacklustre performance in the US, and because of its stable tax regime.

He said that no one in the sector had seen the tax proposals coming and argued that they had the potential to damage the recruitment of overseas academics in "any discipline that travels".

He added: "It's perverse, given that many of these recruitments have been done deliberately with the Government, and we, with the research councils and charitable supporters, have been putting capital money into facilities to attract world-class scientists and other scholars."

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