Guy Hands is one of Britain’s most well-known investors. He has admitted that he regrets leaving the UK and becoming a tax exile. However, he warns others to not follow his example , if Labour increases taxes on private equity.
The private equity dealmaker who moved to Guernsey to avoid high taxes more than 10 years ago now regrets the decision because it has been a “disaster for his business”.
Mr Hands warned of a possible exodus from the UK due to a proposed tax raid by Labour on the private equity sector. He warned others not to follow suit and move offshore.
“Moving from Guernsey to Guernsey had a significant impact on my ability to establish and maintain strong business relationships, which were the foundation of my success. I lost the flow in the market.
“It was a catastrophe for me.”
Mr Hands, one of Britain’s leading investors, has invested billions in everything from care homes to record labels during his long and sometimes controversial career.
Terra Firma was spun out of Nomura, a Japanese bank.
Multi-millionaire, with an estimated net wealth of more than PS200m he moved to Guernsey from Kent in 2009 before proposed tax changes targeted wealthy investors. Guernsey has a population around 64,000 and a 20pc flat rate on income taxes. There are no capital gains taxes or dividends.
Mr Hands warned Labour’s plans to close the private equity loophole would encourage other investors to move abroad to take advantage of more favorable regimes in rival financial centres like Paris and Amsterdam.
Labour has pledged to reduce the tax rate on carried interest. This is a major part of private equity executive’s pay packages.
Carry interest is taxed using the lower capital gain rate instead of income tax. Labour wants to close the loophole by taxing carried interest at income rates.
Mr Hands claimed that this would damage public finances as private equity barons will abandon Britain.
He said: “Governments need to have a clear understanding of what message they are sending to the business community, and they must stick to that message if they wish to encourage growth.”
Mr Hands, aged 64, retired as Terra Firma’s chief executive in January this year, after running the company for more than 20 years.
His investment of £4.2bn in record label EMI that went sour in the middle of the financial crisis is what he’s best known for. After the label collapsed, Citi was involved in a legal battle. Mr Hands abandoned his lawsuit against the US Investment Bank that had advised the deal.
Over the years, Mr Hands has also had to deal with headaches resulting from investments in military homes and care home providers Four Seasons.
Annington is locked in a legal battle for years with the Government regarding the privatisation of housing for military personnel. The High Court ruled earlier this year that , the Ministry of Defence can retake the control of homes valued at £8bn due to the “bad deal” of the sale. Annington, which ultimately is controlled by Mr Hands plans to appeal.
In recent years, Mr Hands, his wife Julia and their combined worth of around £250m have established a boutique-hotel chain. They also own the biggest McDonald’s franchisee in the Nordic region.
Mr Hands isn’t the first businessman who has moved to a nation with lower taxes. Sir Jim Ratcliffe, a British businessman, left the UK three years ago for Monaco’s tax-free status.