The Italian Job: Fears of a Labour tax crackdown send UK private equity bosses fleeing to Milan

London private equity bosses are considering a flight to Milan amid fears over Labour’s tax plans.

Sir Keir Starmer’s party wants to raise tax on fund managers’ bonuses to 45 per cent if it wins the election.

As a result, top City lawyers are fielding more calls than ever from private equity clients planning a getaway to the big Italian city (already seen as a much more solid environment under Prime Minister Giorgia Meloni).

Marco Cerrato, a partner at Maisto e Associati, whose job is to help clients move to Italy, said: “We are trying to deploy all the resources we can.”

With opinion polls pointing to a landslide victory for Labour, the party’s campaign promise to target private equity is fuelling concerns of more taxes on the rich, he added.

Milan has attracted major investment firms in recent years, including Capstone Investment Advisors, Eisler Capital and billionaire Steve Cohen’s Point72 Asset Management.

Home to renowned international schools, it is close to coastal towns, lakes and alpine ski resorts.

Peter Ferrigno, tax director at Henley and Partners, said: “UK citizens are concerned about what a Labour government might do with private equity holdings.”

With Labour on the verge of a landslide victory, listed private equity firms took a hit yesterday.

Amid fears of higher taxes for buyout companies, shares in 3i and Petershill Partners fell around 1 percent.

Labour wants to increase the amount of tax on carried interest (the share of investment returns shared by fund managers) from 28% to 45%. Shadow chancellor of the Exchequer Rachel Reeves said in 2021 that the tax loophole was “absurd”.

And during the launch of Labour’s election manifesto on 13 June, Sir Keir, the party leader, said he was “absolutely determined” to bring about change.

Meanwhile, preferential tax treatment for wealthy non-UK domiciled foreign residents will be phased out from April next year.

Chancellor of the Exchequer Jeremy Hunt announced the phase-out in the last Budget, but the super-rich are worried that Labour will move faster and further.

To escape taxes, Milan has become a focus for private equity executives fleeing London.

A flat tax rate for foreign residents has increased Italy’s appeal to wealthy people as it means they would pay €100,000 (£84,660) on their overseas income.

And political uncertainty in France and Germany has taken the shine off destinations like Paris and Frankfurt.

Emmanuel Macron’s snap election has sent French bonds tumbling this week amid fears the far-right could win the upcoming parliamentary elections.

By comparison, Italy’s far-right leader Meloni (the country’s first female prime minister) is seen as bringing more stability.

Figures show that around 2.2 billionaires will move to the country this year.

Italy is also convenient for those who have family still living in the UK, compared to other destinations such as Greece and Dubai.

Simon Goldring, private client and tax partner at Excello Law, said: “With the possibility of changes to the taxation of carried interest, private equity bosses are looking to move to Milan to take advantage of Italy’s ‘res non-dom’ regime – a tax regime aimed at attracting wealthy individuals to become tax resident in Italy.”