Figures show rich homeowners avoiding billions in stamp duty

15 january 2013

The Treasury faced demands last night to examine the extent of tax avoidance by the country’s wealthiest homeowners who have transferred £25bn worth of property into corporate hands.

Unpublished government estimates show that about 5,000 British homes are believed to be registered in a way that would allow their owners to avoid a slew of property taxes.

The statistics were obtained by the investigative website Exaro.

The high-value properties are overwhelmingly in central London and about 500 of the homes, worth a total of £1.6bn, were transferred last year.

In his Budget the Chancellor, George Osborne, promised to come down “like a ton of bricks” on the practice of switching large properties into corporate control and immediately introduced a stamp duty levy of 15 per cent for houses bought through a company.

The Treasury plans to introduce a new annual charge next April for £2m-plus properties held through companies . It is also proposing to extend capital gains tax to profits made by offshore companies on the sale of those properties, from which they are currently exempt.

However, tax experts say the real challenge is closing an inheritance tax loophole which enables foreign companies to avoid the 40 per cent tax payable when a property owner dies.

In the case of Rinat Akhmetov, the Ukrainian billionaire who bought the penthouse at One Hyde Park through an offshore company, the Treasury stands to lose almost £55m unless the loophole is closed before he dies.

Last night the Treasury said it could not comment on Exaro’s conclusions, but that the Government was taking tough action to stamp out tax avoidance on property.

Cathy Jamieson, the shadow Treasury minister, said families on low and middle incomes would be shocked by the extent of this tax avoidance.

She said: “The Treasury must investigate just how much the British taxpayer is losing from these arrangements. We have called on the Government to clamp down on this type of tax avoidance. With George Osborne’s claim that ‘we are all in this together’ already in tatters thanks to his tax cut for millionaires, it’s time he got a move on and acted on this issue.”

On Cornwall Terrace, an upmarket conversion of eight imposing period houses overlooking Regent’s Park in London, the average asking price is £35m, making it the world’s most expensive row of Georgian mansions. Every home sold has reportedly gone to an offshore company, meaning the buyers would have to pay only £52,500 to buy shares in the company, instead of £2.45m in stamp duty at 7 per cent.

The developer, Oakmayne Bespoke, said it had paid stamp duty land tax “in full on its acquisition of the properties” before carrying out its luxurious redevelopment, but declined to comment on subsequent sales.

John Whiting, the tax policy director at the Chartered Institute of Taxation, said: “These figures confirm that a substantial body of expensive property is held in a way that helps their owners avoid taxes that you and I pay. I’m quite sure the average UK taxpayer will question why these exemptions exist.”

Richard Murphy, a director of Tax Research LLP, said that in spite of claims that “aggressive tax avoidance was morally repugnant”, the Budget measures were no more than “tokenism”.