London bankers halt the great escape to Geneva

The exodus of British bankers fleeing Alistair Darling's tax hike and bonus levy is on hold. According to Terry Smith, chief executive of Tullett Prebon, far fewer brokers than expected have sought posts in less tax-onerous jurisdictions like Geneva or Singapore.

The tax flight abruptly halted last month after a landmark ruling that Robert Gaines-Cooper, a British businessman based in the Seychelles, was still liable for British tax despite living in the Seychelles spending less that 90 days in the UK. The Court of Appeal ruled Gaines-Cooper was still obliged to the Inland Revenue because "the centre of gravity of his life and interests" remained in the UK.

Bankers considering abandoning Britain now have no reason to do so if they will still be exposed to UK tax under similar reasoning. Smith said it is "increasingly difficult" to move to a more beneficial tax regime if staff keep a home in Britain or come back often to visit clients or family.

"Any of our staff who went would probably have to relocate entirely, taking their wives and children with them," explained Smith. "But they don't know now whether even coming back on a client visit would mean they would qualify as residents."

According to the Times, tax advisors are advising wealthy non-doms to cut all ties with Britain - including taking their wives and children, selling their property, resigning British company directorships and changing club memberships - to avoid being snared by the Revenue.

Whilst the abroad flight may be off, banking officials are warning that the increased UK tax burden is challenging notions of fairness (the top rate of tax for anyone earning over £150,000 will rise to 50 per cent in April). Angela Knight, CEO of the British Bankers' Association, says for the past three decades there has been an "unwritten understanding" that whatever happened in the rest of the UK, the financial services industry would have a proportionate tax regime and be open to international business.

That may no longer the case, Knight says. "Any new government has got to reinforce the messages of sensible tax, sensible regulation and that we want international business operating out of here," she told Financial News. "Some of the things have got to be thought through again, particularly, I would say, stability in the tax regime."

Stuart Fraser, policy chairman at the City of London Corporation, echoed Knight's message. "We need a more supportive tone coming out of government, because at the moment everybody feels like they are being taxed out of existence, nobody wants us, we're all 'socially useless'..." But staying all the same.