Greece is the largest shipowning nation in the world, and London is the world’s leading centre for professional maritime services. It’s this along with cultural links, our business environment and London’s financial role that has meant London has long been home to Greek shipowners. News broke recently that Greek shipping tycoon Peter Livanos is joining two prominent City figures to launch a private investment vehicle. There is a clearly a natural bond.
The world’s biggest shipping exhibition was held in Greece this month. At Posidonia, the head of the Union of Greek Shipowners said at a press conference that Greek owners would like to head back to the UK capital.
Many Greeks left London when the government made it very hard for international businesses to base themselves in the UK to support their operations without facing double taxation. Something that other competitor maritime nations avoid. Shipping is, but its nature, the most global of industries. So to grow, we must remain competitive.
That Greeks want to move back isn’t news. A study from last year concluded that more than half of Greek shipowners would consider relocating, found that only Singapore was a more popular destination than London.
There is clearly a natural connection between Greece and London. But for those of us who want to grow the maritime sector in the UK, we need to be proactive.
We need to not only rely on the warmth of relationship, but create an environment that makes the relocation to London more compelling and attractive, and turns aspirations into action. And to do that, we need government intervention.
Many Greeks (as well as other international shipowners) left the UK when the Statutory Residence Test was introduced in 2013, with the intention of laying down, for tax purposes, rules regarding an individual’s residency in the UK. At the time, the introduction of the Test was largely welcomed; it was felt that it would end much of the uncertainty surrounding an individual’s status in the UK and the drawn-out negotiations between individuals and HMRC that were necessary to establish residency. But the Test has certain characteristics that are detrimental to the sector’s business services industry––and the overall sector––due to the uniquely international nature of shipping. A review of the Test after some time had elapsed was contemplated at the time of the Test’s introduction. Now, the industry as a whole is calling on the government to initiate that review.
A 2017 sector study found that in 2015, the business services arm of the maritime industry directly generated more than £4.5 billion in business turnover and £2 billion in GVA, while supporting over 11,500 jobs. These figures represent 11.3% of the UK maritime sector’s overall turnover, 13.9% of its overall GVA, and 10.3% of the jobs it supports. There is a direct relationship between ship ownership and the development of maritime business services and rest of the support chain, according to the Government’s own data.
This request for a review into the Test does not relate to the taxation of so-called Non-Doms; on this issue the government has made its policy position clear and the maritime industry understands this. Instead, what we are advocating is an immediate review into a policy that unfairly penalises those who do not reside in the UK but base their business here. Many shipowners wish to continue to maintain their operations in the UK, on the condition that in practical terms they could do so without prejudicing their (new) non-resident status. This is where the problem arises.
According to the Test, the determining factor regarding UK tax residency is the individual’s number of ‘ties’ to the country. If an individual spends 40 or more days of the year working in the UK for three or more hours per day, that constitutes a tie. The Test effectively double-counts days, however, as the number of days merely spent in the UK is also counted. Consequently a shipowner wishing to maintain his or her operations in the United Kingdom, employing highly productive staff and making use of the UK’s maritime business services in doing so, cannot supervise those operations for fear of failing the Test. Thus, the owner who decides to reside outside the UK is also forced to move their operations out of the country. It follows that it also makes the UK less attractive for foreign shipowners looking to move their operations here, and it is attracting business, not retaining business, which should be the priority for a city with the clout, maritime and otherwise, of London. The Test in its current form unnecessarily weakens maritime business services in the UK and, by extension, the overall sector, which both the government and the industry itself are committed to strengthening.
We’re not advocating some form of casino style capitalism with a race to the bottom. It’s about bringing our rules into line with our European neighbours. In two social democratic European economies – Germany and Norway – the residence test is far simpler. In both countries, an individual may spend a maximum of 180 days (again, compared to our 40).
If the Test is not reviewed and remains as it is, both competitor maritime nations could look increasingly attractive to owners driven out of the United Kingdom and business owners in other countries looking to move their operations abroad.
This change is one that can be made within the parameters of current EU state aid guidelines. So there really is very little reason not to. If government is serious about supporting the maritime sector, it will initiate this review.
In its industrial strategy, the government asked sectors to identify where the government can take action to create greatest impact to support the growth of a sector. Maritime is working on a sector deal, and we’ve identified this very modest change as an area that fits the bill.
As a sector, we’re keen to talk to HM Treasury, and will have that discussion shortly.
We’ve got a golden opportunity to align our business environment with the opportunities we know are waiting for us. Let’s not miss the boat.
Learn more about the maritime sector deal: http://www.maritimeuk.org/programmes/industrial-strategy/
Source: Maritime UK, 20 June 2018